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Infy : Under promises and over delivers - Views on News from Equitymaster
 
 
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  • Jul 10, 2001

    Infy : Under promises and over delivers

    Infosys has beaten its earnings forecast for 1QFY02, with a YoY growth of 72% in net sales. Net profits have grown by 49.8% YoY. However, excluding the other income from transfer of intellectual property right to Onscan Inc. (Rs 55 m) the growth in net profits is 56.6% YoY. The company has managed to add 26 new clients during the 1QFY02. The figure is lower compared to 37 in 4QFY01. On a QoQ basis the company has posted a growth in topline of 9% and a growth in net profits by 4.6%.

    (Rs m) 4QFY01 1QFY02 Change
    Sales 5,619 6,125 9.0%
    Other Income 102 135 32.1%
    Expenditure 3,308 3,720 12.5%
    Operating Profit (EBDIT) 2,311 2,405 4.1%
    Operating Profit Margin (%) 41.1% 39.3% -
    Interest - - -
    Depreciation 379 355 -6.4%
    Profit before Tax 2,034 2,185 7.4%
    Tax 218 285 31.0%
    Provision and contingencies - - -
    Profit after Tax/(Loss) 1,817 1,900 4.6%
    Net profit margin (%) 32.3% 31.0% -
    Diluted number of shares 66.1 66.1 -
    Diluted Earnings per share* 109.9 114.9 4.6%
    *(annualised) - - -
    P/E (x) 31.1 -

    However, the operating margins have declined by 180 basis points compared to 4QFY01.This due to increase in employee costs that have grown by 25% (compared to 4QFY01). The employee costs in 1QFY02 are 42% of the revenues compared to 37% in the previous quarter (4QFY01). In the quarter Infosys has hiked offshore salaries by 15% and onsite salaries by 8%.

    The overall billing rates for the company have come down by 2.8%. While billing rates have gone down for offshore development by 6%, the onsite billing rates have gone up by 1.2%. The onsite revenues contributed to 50.5% of the revenues and the remaining 49.5% came from offshore revenues.

    The net profit figure at Rs 1,900 m is as per Indian GAAP. However, as per the US GAAP the figure would be Rs 1,841 m. The reason for the difference is the amortization stock compensation expenses of Rs 59 m. US GAAP requires the accounting of deferred stock compensation on issue of stock options to employees, being the difference between the exercise price and the fair value as determined by quoted market prices of the common stock on the grant date.

    At the current market price of Rs 3,574, the stock is trading at a P/E multiple of 31 times its 1QFY02 annualised earnings.

     

     

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