Infosys (REDUCE, CMP Rs 1078, and TP Rs 950) Dec’17 quarter results:
Infosys results were largely inline for the quarter with a volume growth of 1.6% for the quarter. OPM improved by 10bps during the quarter at 24.3% ahead of expectations. Adjusted PAT inline at Rs36.9bn (down 0.8% QoQ). Management commentary remained confident as it expect demand environment to improve with more discretionary spend allocations in key verticals in CY18. Guidance has been retained both on revenue growth and OPM band. We believe the results are broadly inline and would now look forward to New CEO commentary on strategic roadmap going forward. We maintain our REDUCE rating on the stock and may review our estimates post the earnings call today at 1830hrs – 022 3938 1098.
Sep’17 quarter results highlights
- Revenues at US$ 2.7bn (1% QoQ, 8% YoY and 0.8% QoQ in constant currency terms) inline with our estimates of 1% QoQ US$ revenue growth. IT Services volume growth at 1.6% QoQ (with onsite volumes up 0.4% QoQ and offshore volumes up by 2.2% QoQ).
- EBIT margins improved by 10bps QoQ to 24.3% better than our expectations of 23.9%. OPM gains is positive development given the fact that it offered wage hikes and variable payouts during the quarter.
- Adjusted Profits at Rs36.9bn (down 0.8% QoQ, down 0.3% YoY) ahead of our expectations (of Rs 35bn) aided by beat on operating margins and higher other income. Reported PAT at Rs51.3bn were up 38% QoQ as it benefitted by one time reversal of about Rs14.3bn towards tax provisions no longer required (conclusion of APA with US IRS).
- Guidance retained at 5.5%-6.5% for CC revenues. OPM range outlook also maintained at 23%-25%.
Operating metrics performance at a glance
Volumes
- Volumes (IT Services): 1.6%QoQ and 6.2%YoY.
- Utilization without trainees: 84.9%, up 20 bps QoQ.
- Utilization with trainees: 82.1%, up 30 bps QoQ.
Growth by Verticals (all in constant currency terms)
- Financial Services: 0.1%QoQ
- Manufacturing: down 0.1%QoQ
- Retail: 1.2%QoQ
- ECS: 2.5% QoQ
Growth by Geographies (all in constant currency terms)
- US: 0.7%QoQ
- Europe: 4.7%QoQ
- ROW: down 4% QoQ
- India: down 5.9% QoQ
Growth by client metrics
- Top 1: 1%QoQ
- Top 10: -0.6% QoQ
- Non Top 10: 1.4% QoQ
Infosys: Sep’17 quarter result summary
|
In Rs mn
|
Q3FY18A
|
Q2FY18
|
QoQ(%)
|
Q3FY17
|
YoY(%)
|
Q3FY18E
|
|
Net sales (US$ Mn)
|
2,755
|
2,728
|
1.0%
|
2,551
|
8.0%
|
2,755
|
|
Net sales (Rs, Mn)
|
177,940
|
175,670
|
1.3%
|
172,730
|
3.0%
|
177,945
|
|
Operating expenses
|
134,750
|
133,210
|
129,390
|
135,424
|
||
|
EBIT
|
43,190
|
42,460
|
1.7%
|
43,340
|
-0.3%
|
42,521
|
|
Margins (%)
|
24.3
|
24.2
|
10
|
25.1
|
(80)
|
23.9
|
|
Other income
|
9620
|
8830
|
8200
|
5960
|
||
|
Pre-tax profit
|
52,810
|
51,290
|
3.0%
|
51,540
|
2.5%
|
48,481
|
|
Tax provided
|
1520
|
14030
|
14460
|
13478
|
||
|
Profit after tax
|
51,290
|
37,260
|
37.7%
|
37,080
|
38.3%
|
35,003
|
|
Emkay Net profit *
|
36,970
|
37,260
|
-0.8%
|
37,080
|
-0.3%
|
35,003
|
|
EPS, Rs
|
23.6
|
16.3
|
44.7%
|
16.2
|
|
16.1
|
* Adjusted for tax reversal of Rs14,320mn.
