Infy beats expectations in 2QFY02 - Views on News from Equitymaster

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Infy beats expectations in 2QFY02

Oct 10, 2001

Infosys has beaten all market expectations with a superb performance for 2QFY02. The company has posted a sequential growth (QoQ) of 6.1% in revenues and the sequential increase in net profit is 6.1%. On a YoY basis the company’s revenues have grown by 45.7% and the rise in bottomline is 30.9%. The highlight of the performance is that the company’s operating margins have improved by 50 basis points. The blended billing rates have gone up by 2.6% during the quarter. The increase in the onsite billing rates has been 3.4% and the offshore billing rates in risen by 1.7%. The company has managed to add 28 new clients during 2QFY02, compared to 26 based in 1QFY01. A point worth of note is that Infosys added 11 of the news clients after the September 11th tragedy in the US. The list of clients added during the quarter figures names like ING group, Royal Bank of Canada, DCZ DekaBank and Kenya Commercial Bank from the banking, financial services and insurance vertical. From the manufacturing sector, the company has added Lear Corporation and Viseton, which are automotive parts suppliers. JDS Uniphase is an addition from the telecom sector.

(Rs m)1QFY022QFY02Change
Sales 6,125 6,501 6.1%
Other Income 135 147 8.7%
Expenditure 3,720 3,912 5.2%
Operating Profit (EBDIT) 2,405 2,589 7.7%
Operating Profit Margin (%)39.3%39.8%-
Interest - - -
Depreciation 355 390 10.0%
Profit before Tax2,1852,3467.3%
Tax 285 330 15.8%
Provision and contingencies - - -
Profit after Tax/(Loss) 1,900 2,016 6.1%
Net profit margin (%)31.0%31.0%-
Diluted number of shares 66.1 66.1 -
Diluted Earnings per share*114.9122.0-
P/E (x) 21.6 20.3 -
*(annualised)   

With these significant client additions, the company has managed to de-risk its client concentration. While the revenues from top 5 clients diluted to 25.3% compared to 27.4% in 1QFY02, contribution to revenues from top ten clients diluted more significantly to 39.7% compared to 43.7% as on 1QFY02.

The net employee addition during 2QFY02 was 607 as compared to 106 for 1QFY02. With this the utilization rates including trainees dropped marginally to 68.8% compared to 69.5% in 1QFY02. However, on a YoY basis the figure has improved compared to 65.4% for 2QFY01. The total number of employees has crossed the 10,000 mark to stand at 10,554 as on September 30, 2001.

Infosys has given its outlook for the quarter ending December 2001. The company expects the topline to dip marginally on a QoQ basis or remain flat. The topline is expected to be in the range of Rs 6,400 m (2% dip, QoQ) to Rs 6,560 m (1% rise, QoQ). The EPS is expected to be in the range of Rs 29 to Rs 31, this translates to a net profit figure between Rs 1,916 m (4.6% decline, QoQ) and Rs 2,049 m (1.9% rise, QoQ).

The company has marginally increased its revenue guidance for FY02. The topline is now expected to be in the range of Rs 25.4 bn and Rs 25.9 bn (previous guidance was Rs 25 bn and Rs 25.6 bn). This means that the topline is now expected to grow in the range 33.6% and 36.3%. The EPS is now estimated to be in range of Rs 120 and Rs 123. The previous guidance on the EPS was in the range Rs 118 and Rs 121. This translates to a growth in net profits in the range of 27.3% to 30.4%, with the bottomline expected to be in the range of Rs 7,932 m and Rs 8,130 m.

At the current market price of Rs 2,503, the stock is trading at a P/E multiple of 20.5 times its 2QFY02 annualised earnings.

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