Infosys Technologies – Hope of Revenue Guidance
April 13, 2010
Infosys Technologies has put a dismal performance for the FY 2009-2010. Pricing declined ~70 bps (constant currency). EBITDA margin declined ~150bps (our exp: ~90bps decline). Reported net profit was Rs16b, in line. However, excluding gains on sale of investment (Rs.480m), it was lower than expectations.
The company expects Overall, US$ revenue growth guidance builds in 3-4% QoQ growth for its guidance of 16-18% YoY revenue growth. EPS growth is muted at -2% to +2% YoY EPS growth with EPS of Rs106.8 to Rs111.3 at Rs44.5/US$. Guidance assumes -150bps YoY margin decline due to rupee and wage hikes. Working backwards, assuming flat YoY margins and rupee rate of Rs45/$ the guidance would work out to ~Rs118/share (+8%yoy EPS growth) in our view.
Infosys has to sail through turbulence of Telecom and insurance sluggish quarters. Wage hikes of ~15% offshore and high attrition – highlighting supply-side challenges for the sector.
FY 2011 EPS Expectations – Morgan Stanley – Rs 126 and Citi Rs 121 while the consensus is at Rs 119. Investors can book profit around Rs 2700 to 2800 and consider exposure to TCS on corrections.