Infosys qurterly update

K E Y N O T E
INSTITUTIONAL RESEARCH

INFOSYS LTD. January 12, 2012

Key Stock Data Good set of numbers
Sector IT-Software
CMP ` 2588
Results Highlights
52wk High/Low 3388 / 2169 In INR terms, Revenues grew 14.8% Q-o-Q and 30.8% Y-o-Y to `9298Cr which was
Market Cap `148,642Cr ahead of the Management’s guidance as well as our expectations, Primary on account of
6m Avg. daily vol 159919 the significant depreciation of INR.
BSE Sensex 16037.51
Reco ‘Buy’ In USD terms, Revenues grew 3.4% Q-o-Q and 13.9% Y-o-Y to $1806Mn which was in
Target Price `3142.5 line with the Management’s guidance as well as our expectations.

In INR terms, EBITDA margin improved by 265bps Q-o-Q to 33.70% in line with our
Stock Codes estimate 33%. PAT margin improved by 198bps Q-o-Q to 25.51% above our expectation
Bloomberg Code INFO IN 24.5%.
Reuters Code INFY.BO
The company has added one of the largest number of clients this quarter, 49 new clients
BSE Code 500209
have been added. Six of them are in Fortune 500.
NSE Code INFY
Face Value `5 Geography-wise Europe has shown good performance which grew by 14%, Whereas US
and Rest of the world was flattish as compared to Q-o-Q. Whereas in terms of vertical,
Shareholding pattern (31st Dec, Manufacturing, Retails and Transportation & Logistics grew by 4.5%, 0.8% and 21.7% Q-
2011) o-Q, respectively.
DII
18% During the Q3FY12 the company and its subsidiaries saw over 6389 employees leaving.
While the company and its subsidiaries hired 9655 employees, the net addition stood at
Publi
FII c&
3266 for the reported quarter. The company has current employee strength of 145088 as
37% Other on Q2FY12
s
29% Outlook and valuation
Prom
oter At current market price of `2588 stock is trading at 17.6x FY2012E and 14.5x FY2013E
16% earnings, which is low as compared to its historical forward PE of 22.0x. Considering
improved deal position and increase in client addition, we maintained a “BUY”
Price Performance (%) recommendation with the DCF based target price of `3142.5, arriving at 21.41x FY12
1 Mth 3 Mths 6 Mths 1 Yr and 17.57x FY13 earning for the unlevered firm.
-5.2% - 3.40% -7.4% -23.3% Financial Highlights `Cr
Particulars FY09 FY10 FY11 FY12E FY13E
Stock Price Performance
Sales 21693.0 22742.0 27501.0 34341.8 41377.6
Close Price BSE IT
Sensex Y-o-Y Growth (%) 30.0% 4.8% 20.9% 24.9% 20.5%
120
Total Expenditure 14498.0 14881.0 18533.0 23304.2 27873.5
110
EBITDA 7195.0 7861.0 8968.0 11037.6 13504.1
100
EBITDA Margin (%) 33.2% 34.6% 32.6% 32.1% 32.6%
90
Other Income 473.0 934.0 1211.0 1498.1 1701.2
80
NPAT 5988.0 6266.0 6835.0 8384.5 10218.3
70
Y-o-Y Growth % 28.5% 4.6% 9.1% 22.7% 21.9%
60
NPAT Margin (%) 27.6% 27.6% 24.9% 24.4% 24.7%
EPS (`) 104.8 109.7 119.7 146.8 178.9
Source: E - Keynote Capitals Institutional Research Estimates

Keynote Capitals Institutional Research is also available on
Bloomberg KNTE <GO>, Thomson One Analytics, Reuters Knowledge, Capital IQ, TheMarkets.com and securities.com
Keynote Capitals Institutional Research –awarded “India’s Best IPO Analyst 2009” by MCX-Zee Business

K E Y N O T E
Quarterly Performance (Consolidated)

Particulars Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
Sales 7,106.0 7,250.0 7,485.0 8,099.0 9,298.0
Q-o-Q % Change 2.3% 2.0% 3.2% 8.2% 14.8%
Y-o-Y % Change 23.8% 22.0% 20.8% 16.6% 30.8%
Total Expenditure 4,743.7 4,926.7 5,309.0 5,585.0 6,165.0
% of sale 66.8% 68.0% 70.9% 69.0% 66.3%
Q-o-Q % Change 2.4% 3.9% 7.8% 5.2% 10.4%
EBITDA 2,362.3 2,323.3 2,176.0 2,514.0 3,133.0
% of sale 33.2% 32.0% 29.1% 31.0% 33.7%
Q-o-Q % Change 2.1% -1.7% -6.3% 15.5% 32.6%
PAT 1,779.3 1,817.3 1,722.0 1,906.0 2,372.0
% of sale 25.0% 25.1% 23.0% 23.5% 25.5%
Q-o-Q % Change 2.5% 2.1% -5.2% 10.7% 33.3%
EPS 31.1 31.8 30.1 33.3 41.5

Growth led by Europe

100% 10.7% 10.3% 11.3% 11.5% 11.9% 12.0% 11.6%
90% 1.7% 2.1% 2.2% 2.7% 2.6% 2.2% 2.1%
80% 20.3% 21.8% 21.8% 22.1% 21.3% 20.5% 22.6%
70%
60%
50%
40%
30% 67.3% 65.8% 64.7% 63.7% 64.2% 65.3% 63.7%
20%
10%
0%
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
North America Europe India RoW

Strong clients addition

665
700 612 620 628 647 60
567 586 583 579 569 571 568 575 590 592
600 509 520 530 538 50
500 40
48 47 49 47 49
400 45
40 40 37 38 40 30
300 35 35 34
30 32 20
200 27 27 26
100 10
0 -

Active Client New client Added during the quarter

Source:- Company and Keynote Capitals Institutional Research

Keynote Capitals Institutional Research 2

K E Y N O T E

Employee Strength as on Q3FY12

160000 141,822 145,088
127,779 130,820 133,560
140000 122,468
114,822
120000
100000
80000
60000
40000
20000
0
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12

Total Employees

Repeat business declined in the Q3FY12

99.0%
98.5% 98.5%
98.0% 98.1% 98.1%
97.5% 97.4%
97.1% 97.3%
97.0%
96.5%
96.0%
95.5%
95.0%
FY08 FY09 FY10 FY11 Q2FY12 Q3FY12

Repeat business (%)

Revenue share from Fixed priced contracts increased to 40.9% as compared to
37.7%

80%
70%
60%
50%
40%
30%
20%
10%
0%

Fixed price Time & Material


3 Keynote Capitals Institutional Research

K E Y N O T E

The company’s outlook (consolidated) for the quarter ending March 31, 2012 and for
the fiscal year ending March 31, 2012, under IFRS is as follows:

Revenue guidance Rupee terms

Particulars Q4FY12E Y-o-Y % FY12E Y-o-Y %

Revenue `9,391Cr - `9,412Cr 29.5% - 29.8% `34,273Cr - `34,294C 24.6% - 24.7%

EPS `42.12 32.4% `147.13 23.2%

US$ conversion = `52
Revenue guidance in $ terms

Particulars Q4FY12E Y-o-Y % FY12E Y-o-Y %

Revenue $1,806mn- $1,810mn 12.7% - 13.0% $7,029mn- $7,033mn 16.4%

EPADS $0.81 15.7% $3.0 14.5%

Utilization (%)

85%

80%

75%

70%

65%

60%

Including Trainees Excluding Trainees



K E Y N O T E

Consolidated Financial Statement
Profit and loss A/c `Cr
Particulars FY10 FY11 FY12E FY13E
Sales 22742.0 27501.0 34341.8 41377.6
% change 4.8% 20.9% 24.9% 20.5%
Total Expenditure 14881.0 18533.0 23304.2 27873.5
% change 2.6% 24.5% 25.7% 19.6%
EBITDA 7861.0 8968.0 11037.6 13504.1
EBITDA Margin 34.6% 32.6% 32.1% 32.6%
Depreciation and Amortization 905.0 854.0 1050.1 1207.6
EBIT 6956.0 8114.0 9987.5 12296.5
Other Income 934.0 1211.0 1498.1 1701.2
Provision for Investment -9.0 0.0 0.0 0.0
Net Profit Before Tax and Minority 7899.0 9325.0 11485.6 13997.6
Provision for Tax 1681.0 2490.0 3101.1 3779.4
NPAT & Before exceptional item 6218.0 6835.0 8384.5 10218.3
Profit on sale of investment 48.0
NPAT 6266.0 6835.0 8384.5 10218.3
NPAT Margin (%) 27.6% 24.9% 24.4% 24.7%

Balance Sheet Statement `Cr
SOURCES OF FUNDS
Share capital 286.0 286.0 286.0 286.0
Reserve and surplus 22763.0 25690.0 30084.6 35555.7
Deferred Tax liability 232.0 176.0 219.8 264.8
Total 23281.0 26152.0 30590.3 36106.5
APPLICATION OF FUNDS
Fixed asset 7839.0 8501.0 9501.1 11501.0
Less: Accumulated depreciation & 2893.0 3266.0 3916.4 4503.8
Net book value 4946.0 5235.0 5584.7 6997.2
Add: Capital work in progress 409.0 525.0 630.0 724.6
Total 5355.0 5760.0 6214.7 7721.8
Investments 3712.0 144.0 160.5 165.5
Deferred Tax Asset , net 432.0 497.0 583.8 703.4
Current Asset
Sundry debtors 3494.0 4653.0 5805.2 6915.2
Cash and bank balance 10556.0 15095.0 18136.7 20974.7
Loans and Advances 4187.0 5320.0 6181.5 7448.0
Less: Current liabilities and Provision
Current liability 2343.0 2677.0 3293.0 3967.7
Provision 2112.0 2640.0 3199.0 3854.4
NET CURRENT ASSETS 13782.0 19751.0 23631.4 27515.8
Total 23281.0 26152.0 30590.3 36106.5


K E Y N O T E
Key Ratios
EBITDA (%) 34.6% 32.6% 32.1% 32.6%
EBIT (%) 30.6% 29.5% 29.1% 29.7%
PBT (%) 34.7% 33.9% 33.4% 33.8%
PAT (%) 27.6% 24.9% 24.4% 24.7%
TAX Rate (%) 21.3% 26.7% 27.0% 27.0%
Efficiency ratios
Average asset turnover 1.1 1.1 1.2 1.2
RoANW (%) 30.3% 27.9% 29.8% 30.9%
RoAA (%) 30.1% 27.7% 29.6% 30.6%
Valuation ratios
CAGR 3 years 17.9% 18.1% 16.5% 22.1%
EPS (`) 109.7 119.7 146.8 178.9
EBITDA (`Cr) 7,861.0 8,968.0 11,037.6 13,504.1
BV (`) 407.0 457.2 534.8 631.2
P/E (x) 25.7 21.6 17.6 14.5
P/BV (x) 6.9 5.7 4.8 4.1
EV 133,558.6 132,587.6 129,529.4 126,686.3
EV/EBITDA (x) 17.0 14.8 11.7 9.4
Dupont Analysis
A) PAT/Sale 27.6% 24.9% 24.4% 24.7%
B) Sale/NA 1.09 1.11 1.21 1.24
C) NA/NW 1.01 1.01 1.01 1.01
ROE (%) 30.3% 27.9% 29.8% 30.9%


K E Y N O T E

Institutional Equity Team
Rakesh Chaudhary (CEO) rakesh@keynoteindia.net +91 22 3026 6034

Analysts / Associates

Denil Savla denil@keynoteindia.net +91 22 3026 6073

Deepak Kolhe deepak@keynotecapitals.net +9122 3026 6084

Rohan Admane rohan@keynoteindia.net +91 22 2269 6059

Rajesh Sinha rajesh@keynotecapitals.net +91 22 3026 6088

Mamta Singh mamta.singh@keynotecapitals.net +91 22 3026 6057

Technical Analyst

Sanjay Bhatia sanjay@keynotecapitals.net +91 22 3026 6047

Dealing / Sales

Nilesh Dhruv nilesh@keynoteindia.net +91 22 3026 6040

Nisha Sharma nisha.sharma@keynotecapitals.net +91 22 3026 6041

KEYNOTE CAPITALS LTD.
Member
Stock Exchange, Mumbai (INB 010930556)
National Stock Exchange of India Ltd. (INB 230930539)
Over the Counter Exchange of India Ltd. (INB 200930535)
Central Depository Services Ltd. (IN-DP-CDSL-152-2001)
4th Floor, Balmer Lawrie Building, 5, J. N. Heredia Marg, Ballard Estate, Mumbai 400 001. INDIA
Tel. : 9122-2269 4322 / 24 / 25 • www.keynoteindia.net

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Infosys qurterly update

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Infosys qurterly update