16/04/2016
(22:00)
Trading Idea: Infy
LTP:
931
Sell
below 920 or on rise around 980-990
TGT:
900/880-840 & 825-780-745 (1-3M)
TSL>
950 OR > 1000
Note:
Sustaining above 950 area, Infy may rally towards 980-1000 area, which may be a
strong resistance zone and only consecutive closing above 1000 area, the stock
may further rally for 1025-1050 zone in the short term. Further sustaining
above 1050 area, Infy may target 1200-1215 zone in the mid to long term.
Those
having long positions in Infy or planning to enter fresh long, may also watch
900-880 area as nearest positional support as sustaining below this zone, the
stock may be further weak and fall towards 825-745 zone.
Investment Idea: Infy
LTP:
931
Buy
on dips around 900-880 & accumulate on further dips if fall around 825-745
TGT:
1050-1125 & 1215 (12-24M)
For Infy: Consolidated basis
Actual
FY-17 EPS: 62.77
Current
Average PE: 17
Ideal
PE: 12
Median
Valuation: 753 (TTM Q4FY17)
Projected
FY-18 EPS: 68.37 (as par current & implied run rate and average of
consensus estimates & Co’s own guidance)
Median
Valuation: 820 (Projected FY-18)
Projected
FY-19 EPS: 75
Median
Valuation: 900 (Projected FY-19)
Projected
median PE: 12 (considering management guidance of 7.5% growth and combination
of current & implied run rate for previous quarters & years; market may
re-rate Infy for its tepid growth despite huge FCF & a strong BS)
In that
scenario, current & projected median valuation of Infy may be:
|
Valuation
Metrics
|
FY17(TTM)
|
Q1FY18E
|
Q2FY18E
|
FY18E
|
FY19E
|
|
TTM
EPS
|
62.77
|
63.34
|
63.68
|
68.37
|
75
|
|
MEDIAN
PE
|
12
|
12
|
12
|
12
|
12
|
|
MEDIAN
FAIR VALUE
|
753.24
|
760.08
|
764.16
|
820.44
|
900.00
|
|
ANALYST
PROJECTION (EPS)
|
FY18
|
FY19
|
|
FT/REUTERS
|
67.2
|
72.95
|
|
OTHERS
|
67.3
|
73.1
|
|
RUN
RATE
|
71.50
|
81.4
|
|
AS
PAR CO PROJ@7.5% YLY
|
67.48
|
72.54
|
|
MEDIAN
EPS
|
68.37
|
75.00
|
|
ANALYST
PROJECTION (EPS)
|
Q4FY17
|
Q1FY18
|
Q2FY18
|
|
FT/REUTERS
|
15.75
|
15.05
|
16.35
|
|
REPORTED
|
15.76
|
|
|
|
RUN
RATE
|
15.76
|
15.67
|
15.58
|
|
AS
PAR CO PROJ@7.5% YLY
|
|
16.05
|
16.4
|
|
MEDIAN
EPS
|
|
15.59
|
16.11
|
Infy
reported an EPS of 15.76 on consolidated basis for Q4FY17 against consensus of
15.75 (QOQ: 16.22; YOY: 15.74).
EPS
for FY-17: 62.77 (YOY: 59.02) implied a tepid growth rate of around 6.35%
against 9.42% in FY-16 and moreover its below co’s previous guidance of 8.5%;
management has guided FY-18 growth at around 7.5% (6.5-8.5%) as such, Infy may
not be treated as “growth stock” and eventually re-rated by the market around
12 PE in lieu of its current PE of 15 and average median PE of 17 for the last
few years.
It
seems that despite sitting on a huge free cash pile of around $6 bln, the
company has no idea for innovations & further incremental growth in today’s
context of IT technology and business model. Traditional days of code writing
and service maintenance of enterprise solution may be over; Indian IT big wigs
may have to find some innovative way for a double digit growth. Guidance of
Infy for 7.5% growth in FY-18 may be lower by industry standard itself and that
of Cognizant also. Although, Infy has already taken some steps to rejuvenate
growth by acquiring some start ups/companies in AI, digital/automation, cloud
technology etc, it may be too little & too late.
Infy
is planning to return a substantial portion of its current FCF to shareholders
by way of extra dividends & share buy backs; but although such buy back may
be positive for the stock price in the short term, in the long term it may also
indicate that the co has no proper business plan or rather a proper opportunity
to use its cash to expand. Only a definitive big buy backs offer by the co at
this stage may be able to reverse its present downwards trend for the stock
price.
|
INFY-YLY-FY-17
|
Mar
'17
|
Mar
'16
|
Mar
'15
|
Mar
'14
|
Mar
'13
|
|
Diluted
EPS
|
62.77
|
59.02
|
53.94
|
46.58
|
41.21
|
|
CAGR(%)
|
6.35
|
9.42
|
15.80
|
13.03
|
Financials
Snapshots: QLY
|
INFY-QLY-Q4FY17
|
Mar
'17
|
Dec
'16
|
Sep
'16
|
Jun
'16
|
Mar
'16
|
YOY
|
QOQ
|
AVG
|
AVGR
|
SGR
|
PROJ
|
Q1FY18
|
Q2FY18
|
|
Net
Sales/Income from operations
|
17,120.00
|
17,273.00
|
17,310.00
|
16,782.00
|
16,550.00
|
3.44
|
-0.89
|
16978.75
|
0.83
|
0.86
|
0.42
|
17191.24
|
17262.77
|
|
Other
Operating Income
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
REVENUE
|
17,120.00
|
17,273.00
|
17,310.00
|
16,782.00
|
16,550.00
|
3.44
|
-0.89
|
16978.75
|
0.83
|
0.86
|
0.42
|
17191.24
|
17262.77
|
|
EXPENDITURE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
Cost
|
9,309.00
|
9,420.00
|
9,648.00
|
9,282.00
|
9,024.00
|
3.16
|
-1.18
|
9343.50
|
-0.37
|
0.80
|
0.01
|
9309.87
|
9310.73
|
|
Other
Expenses
|
3,153.00
|
3,086.00
|
2,929.00
|
3,053.00
|
2,887.00
|
9.21
|
2.17
|
2988.75
|
5.50
|
2.23
|
3.05
|
3249.14
|
3348.22
|
|
OPEX
|
12,462.00
|
12,506.00
|
12,577.00
|
12,335.00
|
11,911.00
|
4.63
|
-0.35
|
12332.25
|
1.05
|
1.12
|
0.74
|
12554.76
|
12648.22
|
|
EBITDA
|
4,658.00
|
4,767.00
|
4,733.00
|
4,447.00
|
4,639.00
|
0.41
|
-2.29
|
4646.50
|
0.25
|
0.14
|
-0.45
|
4637.04
|
4616.17
|
|
Depreciation
|
446
|
433
|
424
|
400
|
419
|
6.44
|
3.00
|
419.00
|
6.44
|
1.59
|
3.16
|
460.11
|
474.66
|
|
EBITA
|
4,212.00
|
4,334.00
|
4,309.00
|
4,047.00
|
4,220.00
|
-0.19
|
-2.81
|
4227.50
|
-0.37
|
-0.01
|
-0.81
|
4177.90
|
4144.09
|
|
Other
Income
|
746
|
820
|
760
|
753
|
772
|
-3.37
|
-9.02
|
776.25
|
-3.90
|
-0.68
|
-3.61
|
719.06
|
693.10
|
|
PBIET
|
4,958.00
|
5,154.00
|
5,069.00
|
4,800.00
|
4,992.00
|
-0.68
|
-3.80
|
5003.75
|
-0.91
|
-0.13
|
-1.25
|
4895.80
|
4834.39
|
|
Interest
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBET
|
4,958.00
|
5,154.00
|
5,069.00
|
4,800.00
|
4,992.00
|
-0.68
|
-3.80
|
5003.75
|
-0.91
|
-0.13
|
-1.25
|
4895.80
|
4834.39
|
|
Exceptional
Items
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT
|
4,958.00
|
5,154.00
|
5,069.00
|
4,800.00
|
4,992.00
|
-0.68
|
-3.80
|
5003.75
|
-0.91
|
-0.13
|
-1.25
|
4895.80
|
4834.39
|
|
Tax
|
1,330.00
|
1,446.00
|
1,460.00
|
1,362.00
|
1,394.00
|
-4.59
|
-8.02
|
1415.50
|
-6.04
|
-1.03
|
-4.06
|
1275.99
|
1224.17
|
|
PAT
|
3,628.00
|
3,708.00
|
3,609.00
|
3,438.00
|
3,598.00
|
0.83
|
-2.16
|
3588.25
|
1.11
|
0.23
|
-0.15
|
3622.42
|
3616.85
|
|
Minority
Interest
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
Share
Of P/L Of Associates
|
-25
|
0
|
-3
|
-2
|
-1
|
0.00
|
0.00
|
-1.50
|
1566.67
|
0.00
|
0.00
|
-25.00
|
-25.00
|
|
Net
P/L After M.I & Associates
|
3,603.00
|
3,708.00
|
3,606.00
|
3,436.00
|
3,597.00
|
0.17
|
-2.83
|
3586.75
|
0.45
|
0.06
|
-0.57
|
3582.53
|
3562.18
|
|
Equity
Share Capital
|
1,144.00
|
1,144.00
|
1,144.00
|
1,144.00
|
1,144.00
|
0.00
|
0.00
|
1144.00
|
0.00
|
0.00
|
0.00
|
1144.00
|
1144.00
|
|
EPS
|
15.75
|
16.21
|
15.76
|
15.02
|
15.72
|
0.17
|
-2.83
|
15.68
|
0.45
|
0.06
|
-0.57
|
15.66
|
15.57
|
|
EPS(REPORTED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
15.77
|
16.22
|
15.77
|
15.03
|
15.74
|
0.19
|
-2.77
|
15.69
|
0.51
|
0.07
|
-0.54
|
15.69
|
15.60
|
|
Diluted
EPS
|
15.76
|
16.22
|
15.77
|
15.03
|
15.74
|
0.13
|
-2.84
|
15.69
|
0.45
|
0.05
|
-0.58
|
15.67
|
15.58
|
|
TTM
EPS
|
62.78
|
62.76
|
|
|
|
|
|
|
|
|
|
63.42
|
63.23
|
|
MEDIAN
PE
|
12
|
12
|
|
|
|
|
|
|
|
|
|
12
|
12
|
|
MEDIAN
VALUATION
|
753.36
|
753.12
|
|
|
|
|
|
|
|
|
|
761.03
|
758.74
|
|
INFY-QLY-Q4FY17
|
Mar
'17
|
Dec
'16
|
Sep
'16
|
Jun
'16
|
Mar
'16
|
YOY
|
QOQ
|
AVG
|
AVGR
|
SGR
|
PROJ
|
Q1FY18
|
Q2FY18
|
|
EBITDA(%)
|
27.21
|
27.60
|
27.34
|
26.50
|
28.03
|
-2.93
|
-1.41
|
27.37
|
-0.58
|
-0.77
|
-0.87
|
26.97
|
26.73
|
|
NP(%)
|
21.19
|
21.47
|
20.85
|
20.49
|
21.74
|
-2.52
|
-1.28
|
21.14
|
0.26
|
-0.67
|
-0.58
|
21.07
|
20.95
|
Financials:
YLY
|
INFY-YLY-FY-17
|
Mar
'17
|
Mar
'16
|
Mar
'15
|
Mar
'14
|
Mar
'13
|
FY:13-17
|
FY:16-17
|
AVG
|
AVGR
|
SGR
|
PROJ
|
FY-18
|
FY-19
|
|
Net
Sales/Income from operations
|
68,484.00
|
62,441.00
|
53,319.00
|
50,133.00
|
40,352.00
|
69.72
|
9.68
|
51561.25
|
32.82
|
13.16
|
18.27
|
80997.84
|
95798.30
|
|
Other
Operating Income
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
REVENUE
|
68,484.00
|
62,441.00
|
53,319.00
|
50,133.00
|
40,352.00
|
69.72
|
9.68
|
51561.25
|
32.82
|
13.16
|
18.27
|
80997.84
|
95798.30
|
|
EXPENDITURE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
Cost
|
37,659.00
|
34,406.00
|
29,742.00
|
28,834.00
|
22,566.00
|
66.88
|
9.45
|
28887.00
|
30.37
|
12.51
|
17.26
|
44159.71
|
51782.59
|
|
Other
Expenses
|
12,221.00
|
4,692.00
|
3,141.00
|
3,307.00
|
2,714.00
|
350.29
|
160.46
|
3463.50
|
252.85
|
55.69
|
139.14
|
29225.86
|
69892.07
|
|
Admin.
And Selling Expenses
|
0
|
7,723.00
|
6,604.00
|
5,951.00
|
4,643.00
|
-100.00
|
-100.00
|
6230.25
|
-100.00
|
-12.53
|
-59.38
|
0.00
|
0.00
|
|
OPEX
|
49,880.00
|
46,821.00
|
39,487.00
|
38,092.00
|
29,923.00
|
66.69
|
6.53
|
38580.75
|
29.29
|
12.55
|
16.26
|
57991.47
|
67422.02
|
|
EBITDA
|
18,604.00
|
15,620.00
|
13,832.00
|
12,041.00
|
10,429.00
|
78.39
|
19.10
|
12980.50
|
43.32
|
15.07
|
24.27
|
23119.94
|
28732.09
|
|
Depreciation
|
1,703.00
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
1703.00
|
1703.00
|
|
EBITA
|
16,901.00
|
15,620.00
|
13,832.00
|
12,041.00
|
10,429.00
|
62.06
|
8.20
|
12980.50
|
30.20
|
12.35
|
16.57
|
19700.90
|
22964.63
|
|
Other
Income
|
3,080.00
|
3,125.00
|
3,427.00
|
2,669.00
|
2,359.00
|
30.56
|
-1.44
|
2895.00
|
6.39
|
7.44
|
5.01
|
3234.25
|
3396.22
|
|
PBIET
|
19,981.00
|
18,745.00
|
17,259.00
|
14,710.00
|
12,788.00
|
56.25
|
6.59
|
15875.50
|
25.86
|
11.40
|
14.48
|
22874.04
|
26185.97
|
|
Interest
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBET
|
19,981.00
|
18,745.00
|
17,259.00
|
14,710.00
|
12,788.00
|
56.25
|
6.59
|
15875.50
|
25.86
|
11.40
|
14.48
|
22874.04
|
26185.97
|
|
Exceptional
Items
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
PBT
|
19,981.00
|
18,745.00
|
17,259.00
|
14,710.00
|
12,788.00
|
56.25
|
6.59
|
15875.50
|
25.86
|
11.40
|
14.48
|
22874.04
|
26185.97
|
|
Tax
|
5,598.00
|
5,251.00
|
4,929.00
|
4,062.00
|
3,367.00
|
66.26
|
6.61
|
4402.25
|
27.16
|
12.90
|
15.81
|
6482.97
|
7507.83
|
|
PAT
|
14,383.00
|
13,494.00
|
12,330.00
|
10,648.00
|
9,421.00
|
52.67
|
6.59
|
11473.25
|
25.36
|
10.84
|
13.99
|
16394.96
|
18688.35
|
|
Minority
Interest
|
0
|
0
|
0
|
0
|
0
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|
Share
Of P/L Of Associates
|
-30
|
-3
|
-1
|
0
|
0
|
0.00
|
900.00
|
-1.00
|
2900.00
|
0.00
|
20.00
|
-36.00
|
-43.20
|
|
Net
P/L After M.I & Associates
|
14,353.00
|
13,491.00
|
12,329.00
|
10,648.00
|
9,421.00
|
52.35
|
6.39
|
11472.25
|
25.11
|
10.78
|
13.84
|
16339.78
|
18601.57
|
|
Equity
Share Capital
|
1,144.00
|
1,144.00
|
1144
|
1144
|
1144
|
0.00
|
0.00
|
1144.00
|
0.00
|
0.00
|
0.00
|
1144.00
|
1144.00
|
|
EPS
|
62.73
|
58.96
|
53.89
|
46.54
|
41.18
|
52.35
|
6.39
|
50.14
|
25.11
|
10.78
|
13.84
|
71.42
|
81.30
|
|
EPS
After Extra Ordinary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
62.8
|
59.03
|
53.94
|
46.58
|
41.21
|
52.39
|
6.39
|
50.19
|
25.12
|
10.79
|
13.85
|
71.50
|
81.40
|
|
Diluted
EPS
|
62.77
|
59.02
|
53.94
|
46.58
|
41.21
|
52.32
|
6.35
|
50.19
|
25.07
|
10.78
|
7.50
|
67.48
|
72.54
|
|
MEDIAN
PE
|
17
|
17
|
17
|
17
|
17
|
|
|
|
|
|
|
12
|
12
|
|
MEDIAN
VALUATION
|
1067.09
|
1003.34
|
916.98
|
791.86
|
700.57
|
|
|
|
|
|
|
809.73
|
870.46
|
To be Cont for more update---
Analytical Charts: Infy
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