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January 14, 2019 1
Rating: BUY | CMP: Rs684 | TP: Rs810
Solid revenue growth, Margin disappoints
Led by solid revenue growth in Q3FY19, we raise Infosys USD revenue growth
assumptions to 7.8/9.3/9.2% for FY19/FY20/21E (vs 7.5/9.2/9.2% modeled
earlier). Infosys would need to deliver 1.9% QoQ in cc in Q4FY19 to achieve
9% cc growth guidance for FY19 which is favorably doable seeing the growth
momentum. Our USD/INR assumptions stand at 70/70.5/72 for
FY19/FY20/FY21E. Owing to tepid margin execution in Q3FY19 we model EBIT
margins at 23.4/24.1/24.4% for FY19/FY20/21E (vs 24.3% in FY18). Hence,
despite INR depreciation in FY19 (vs FY18), Infosys is likely to report modest
YoY drop in EBIT margin. We maintain our EPS for FY19E at Rs37.5. Buyback
announcement and USD revenue upgrade are negated by EBIT margin
downgrade and hence we marginally upgrade our EPS estimates by 1.7/1.9%
for FY20/FY21E to Rs43/47. We believe Infosys valuations are reasonable
considering the improving growth trajectory. Hence we raise our TP by 2.5%
to Rs810 (18x Sep20E EPS). Retain Buy.
Strong Revenue beat: Infosys 3QFY19 results were a mixed bag. Revenues at
USD2987mn were up 2.3% QoQ and above our estimates (Ple: USD2965mn).
Constant currency growth for the quarter stood at 2.7% which is above our
estimates (Ple: 2.0% cc growth). This is in comparison with TCS which delivered
1.8% QoQ constant currency growth for the quarter. Hence, Infosys has
outperformed TCS on the revenue growth front in 3QFY19. Adjusted EBIT margin
came at 23.0% QoQ and below our estimates (PLe: 24.0%). Headwind from lower
Utilization and Higher onsite mix (-80bps), Increase in Compensation (-30bps),
Sales investments (-30bps) and Acquisitions (-20bps) were partially negated by INR
depreciation (+50bps) and Lower lease cost & other expenses (+40bps). Margins
were also impacted (-40 bps) with one off during quarter led by additional
depreciation of Panaya and Skava. Adjusted PAT came at Rs40.70bn down 1%
QoQ/21% YoY (Ple: Rs42.9bn).
Panaya and Skava sale proposition revoked: Infosys declassified Panaya and
skava from assets held for sale being unable to find potential buyers and thus
guided to refocus Skava’s business and reorienting panaya suits of products. This
revocation resulted into declassification from assets held for sale led to additional
depreciation of USD12mn for ninth months impacting margins and adjustment in
respect of excess of carrying recoverable amount of Rs4510mn in PAT.
Guidance Revised: Infosys has revised constant currency revenue growth
guidance of 8.5%-9% for FY19E. However, retained EBIT margin guidance of 22-
24% for FY19. Management cited necessity for continued investments in 4QFY19.
Implemented Capital allocation Strategy: Company announced buyback of
Rs82.6bn at a price of Rs800 which is 17% to CMP. At Rs800/share Infosys would
be able to buy ~2.4% of Equity (104mn shares out of 4,352 mn shares outstanding.
Company also announced special dividend of Rs4/share which will led to additional
payout of Rs21.1bn and thus company complete the capital allocation strategy for
FY19.
Infosys (INFO IN)
January 14, 2019
Q3FY19 Result Update
☑ Change in Estimates | ☑ Target | Reco
Change in Estimates
Current Previous
FY20E FY21E FY20E FY21E
Rating BUY BUY
Target Price 810 790
Sales (Rs. m) 928,572 1,021,175 925,275 982,462
% Chng. 0.4 3.9
EBITDA (Rs. m) 241,421 267,548 241,489 259,873
% Chng. - 3.0
EPS (Rs.) 43.8 47.1 42.5 46.1
% Chng. 1.7 1.9
Key Financials
FY18 FY19E FY20E FY21E
Sales (Rs. bn) 705 829 929 1,021
EBITDA (Rs. bn) 190 214 241 268
Margin (%) 27.0 25.8 26.0 26.2
PAT (Rs. bn) 160 162 182 199
EPS (Rs.) 36.8 39.1 43.8 48.1
Gr. (%) 17.4 6.1 12.1 9.7
DPS (Rs.) 17.3 23.1 20.6 22.6
Yield (%) 2.5 3.4 3.0 3.3
RoE (%) 23.9 26.1 28.7 27.9
RoCE (%) 23.9 26.1 28.7 27.9
EV/Sales (x) 3.8 3.2 2.8 2.5
EV/EBITDA (x) 14.3 12.3 10.6 9.4
PE (x) 18.6 17.5 15.6 14.2
P/BV (x) 4.6 4.8 4.2 3.7
Key Data INFY.BO | INFO IN
52-W High / Low Rs.755 / Rs.522
Sensex / Nifty 36,010 / 10,795
Market Cap Rs.2,986bn/ $ 42,336m
Shares Outstanding 4,369m
3M Avg. Daily Value Rs.11741.62m
Shareholding Pattern (%)
Promoter’s 13.29
Foreign 34.46
Domestic Institution 22.57
Public & Others 29.68
Promoter Pledge (Rs bn) -
Stock Performance (%)
1M 6M 12M
Absolute 1.3 3.5 28.1
Relative (1.1) 4.3 22.7
Rajat Gandhi
[email protected] | 91-22-66322246
Infosys
January 14, 2019 2
Q2FY19: Revenues remain strong while margins miss’s estimates
Rs mn Q3FY19 Q2FY19 QoQ Q3FY18 YoY Q1FY19(PLe) Var (PL VS
ACTUAL)
Total Operating Income (US$) 2,987 2,921 2.3% 2,755 8.4% 2,965 0.7%
Total Operating Income 214,000 206,090 3.8% 177,940 20.3% 213,763 0.1%
EBIT 48,300 48,940 -1.3% 43,190 11.8% 51,303 -5.9%
Adjusted EBIT Margin 23.0% 23.7% -70bps 24.3% -130 bps 24.0% -100 bps
Pre Tax Income 51,320 56,330 -8.9% 52,810 -2.8% 59,603 -13.9%
Tax 15,220 15,230 1,520 16,689
Tax Rate 29.7% 27.0% 2.9% 28.0%
RPAT 36,100 41,100 -12.2% 51,290 -29.6% 42,914 -15.9%
APAT 40,698 41,100 -1.0% 51,290 -20.7% 42,914 -5.2%
Source: Company, PL
Revenues beat estimates: Revenues stood at US$2987m for Q3FY19, up
2.3% QoQ and above our estimates (US$2965m). Revenue growth stood at
2.7% QoQ in constant currency and above our expectations (PLe: 2.0% cc
growth).
Among verticals, Infosys has shown strong growth in BFSI vertical which is key
positive. BFSI vertical revenues grew by 3.6% QoQ in constant currency and
Infosys cited continued strong momentum in the BFSI vertical. Revenues from
Digital accounts to 31.5% of total revenues up 5% QoQ/33.1% YoY in cc.
Infosys Constant Currency QoQ Growth (%)
3.4%
4.2%
1.2%
-0.4%
1.5%
3.9%
2.6%
-0.4%
4.4%
6.9%
0.6%
1.9%1.7%
3.9%
-0.3%
0.0%
2.7%2.2%
0.8%0.6%
2.3%
4.2%
2.7%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1Q
FY
14
2Q
FY
14
3Q
FY
14
4Q
FY
14
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
2Q
FY
17
3Q
FY
17
4Q
FY
17
1Q
FY
18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
Source: Company, PL
CC revenue growth was 2.7% QoQ.
TCS delivered cc growth of 1.8% for
3QFY19.
BFSI vertical delivered strong growth
during the quarter.
Developed markets (North America
and Europe) remained strong for the
quarter with record TCV wins
Infosys
January 14, 2019 3
Infosys Constant Currency YoY growth (%)
6.6%6.3%
7.9%7.8%
10.9%
14.2%
12.5%
15.0%
12.1%
8.9%
7.3%
5.3%6.3%
4.6%
5.8%6.4%6.0%
8.1%
10.1%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
2Q
FY
17
3Q
FY
17
4Q
FY
17
1Q
FY
18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
Source: Company, PL
Margins below estimates: EBIT margin came in at 22.6% down 110bps QoQ
and down 170 bps YoY and below our estimates (PLe: 24.0%). Headwind from
drop in Utilization and Higher onsite mix (-80bps), Increase in Compensation
(-30bps), Sales investments (-30bps) and Acquisitions (-20bps) were partially
negated by INR depreciation (+50bps) and Lower lease cost & other expenses
(+40bps). Margins were also impacted (-40 bps) with one off during quarter led
by additional depreciation charge of USD12mn with declassification of Panaya
and Skava from assets held for sale and thus margins remain tepid for the
quarter.
EBIT Margin Vs Average Exchange Rate
25.1
% 26.1
% 26.8
%
25.7
%
24.0
%
25.5
%
24.9
% 25.5
%
24.1
% 24.9
%
25.1
%
24.6
%
24.1
%
24.2
%
24.3
%
24.7
%
23.7
%
23.7
%
22.6
%
54
56
58
60
62
64
66
68
70
72
74
22.0%
23.0%
24.0%
25.0%
26.0%
27.0%
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
2Q
FY
17
3Q
FY
17
4Q
FY
17
1Q
FY
18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
EBIT margin Average Exchange Rate
Source: Company, PL
Infosys
January 14, 2019 4
Effort Mix from Onsite and EBIT Margin (%)
25.1
% 26.1
%
26.8
%
25.7
%
24.0
% 25.5
%
24.9
%
25.5
%
24.1
%
24.9
%
25.1
%
24.6
%
24.1
%
24.2
%
24.3
%
24.7
%
23.7
%
23.7
%
22.6
%
27.5%
28.0%
28.5%
29.0%
29.5%
30.0%
30.5%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
26.0%
27.0%
28.0%
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
2Q
FY
17
3Q
FY
17
4Q
FY
17
1Q
FY
18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
EBIT margin(%) Onsite effort
Source: Company, PL
Focus on Automation to drive revenue per reported
employee
Infosys revenue per reported employee (Quarterly annualized) stood at USD
53,912 per employee as on 3QFY19. This represents a -2.1% YoY growth in
constant currency.
Revenue per Reported Employee Quarterly Annualized (USD) and
Growth (YoY)
53,3
87
52,9
59
49,9
44
50,7
38
52,0
71
50,4
14
50,4
30
51,1
59
52,1
56
51,0
72
51,3
64
53,1
64
54,9
73
55,0
82
55,2
98
54,7
04
54,6
44
53,9
12
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
47,000 48,000 49,000 50,000 51,000 52,000 53,000 54,000 55,000 56,000
Q2F
Y15
Q3F
Y15
Q4F
Y15
Q1F
Y16
Q2F
Y16
Q3F
Y16
Q4F
Y16
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
Revenue / Reported Employee (USD) QoQ growth (Decline)
Source: Company, PL
Infosys
January 14, 2019 5
Utilisation remain Weak
IT services utilisation (excluding trainees) came in at 83.8% for Q3FY19 down
180bps QoQ.
IT Services Utilization (excluding trainees)
74.3
%
77.5
%
76.9
%
76.7
%
80.1
% 82.3
%
82.7
%
78.6
% 80.2
%
81.3
%
80.6
%
80.1
%
80.5
% 82.5
%
81.9
%
82.0
% 84.0
%
84.7
%
84.9
%
84.7
%
85.7
%
85.6
%
83.8
%
72.0%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
86.0%
88.0%
1Q
FY
14
2Q
FY
14
3Q
FY
14
4Q
FY
14
1Q
FY
15
2Q
FY
15
3Q
FY
15
4Q
FY
15
1Q
FY
16
2Q
FY
16
3Q
FY
16
4Q
FY
16
1Q
FY
17
2Q
FY
17
3Q
FY
17
4Q
FY
17
1Q
FY
18
2Q
FY
18
3Q
FY
18
4Q
FY
18
1Q
FY
19
2Q
FY
19
3Q
FY
19
Source: Company, PL
Steady TCV wins: TCV wins for the quarter stood at USD 1570mn.
Management cited that 30% of the TCV is net new deals.
TCV Wins
USD mn 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19
TCV 360 757 809 1209 664 806 657 731 779 905 1116 2029 1570
Source: Company, PL
Infosys
January 14, 2019 6
Operating Metrics
Geography Mix of Revenues (%)
Geography Mix (%) 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19
North America 62.5 61.9 62 61.5 62.0 62.3 61.1 60.6 60.4 59.4 60.0 60.3 60.4
Europe 23.2 23.4 23 22.5 22.2 22.1 22.4 23.2 24.4 24.8 24.3 24.0 24.2
India 2.8 3 2.7 3.4 3.4 3.2 3.6 3.3 3 2.8 2.6 2.5 2.6
Rest of the world 11.5 11.7 12.3 12.6 12.4 12.4 12.9 12.9 12.2 13 13.1 13.2 12.8
Source: Company, PL
Geography wise Revenues and Growth in geographies (%)
Growth by Geography (USD mn) Q3FY19 Q2FY19 QoQ Q3FY18 YoY
North America 1804 1761 2.4% 1664 8.4%
Europe 723 701 3.1% 672 7.5%
India 78 73 6.3% 83 -6.0%
Rest of the World 382 386 -0.8% 336 13.8%
Total Revenues 2987 2921 2.3% 2755 8.4%
Source: Company, PL
Growth in Constant Currency in geographies (%) for 3QFY19
3.8 4
6.8
32.6
3.8
0.8
5.2
0
1
2
3
4
5
6
7
8
North America Europe India Rest of the World
2QFY19 3QFY19
Source: Company, PL
Vertical Revenues and wise Growth in Verticals (%)
Growth by Vertical (USD mn) Q3FY19 Q2FY19 QoQ Q3FY18 YoY
Financial Services 971 941 3.2% 904 7.4%
Retail 490 491 -0.2% 446 9.8%
Communication 355 359 -1.1% 342 4.0%
Energy, Utilities, Resources & services 382 359 6.4% 331 15.6%
Manufacturing 302 280 7.6% 264 14.1%
Hi tech 218 219 -0.5% 198 9.9%
Life Sciences 185 187 -0.9% 182 1.9%
Others 84 85 -1.3% 88 -5.1%
Total Revenues 2987 2921 2.3% 2755 8.4%
Source: Company, PL
Infosys
January 14, 2019 7
Revenue growth in Constant Currency for verticals (%) for 3QFY19
5.8 5.9
1.22.8
4.83.6
0.7
3.83.6
-0.1 -0.5
7.4 7.6
0.6 0.0
-1.3-2.0
0.0
2.0
4.0
6.0
8.0
10.0
FS
Reta
il
Com
munic
ation
Energ
y, U
tilities,
Resourc
es &
serv
ices
Manufa
ctu
ring
Hi te
ch
Life S
cie
nces
Oth
ers
2QFY19 3QFY19
Source: Company, PL
Employee Metrics
2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19
Total Employees 199,829 199,763 200,364 198,553 198,440 201,691 204,107 209,905 217,739 225,501
Gross Addition 12,717 9,120 9,130 8,645 10,514 12,622 12,329 17,709 19,721 18,773
Net Addition 2,779 (66) 601 (1,811) (113) 3,251 2,416 5,798 7,834 11,011
Attrition ( Employee leaving per quarter) 9,938 9,186 8,529 10,456 10,627 9,371 9,913 11,911 11,887 7,762
Attrition % Consolidated ( Quarterly Annualized) 20.0 18.4 17.1 21.0 21.4 18.7 19.5 23.0 22.2 19.9
Source: Company, PL
Headcount stood at 225,501 employees with net addition of 7762 employees.
Attrition after consistent spike declined to 19.9% for 3QFY19.
BFSI, Energy Utilities and
Manufacturing delivered strong
performance during the quarter with
growth of 3.6%, 7.4% and 7.6%
respectively in cc terms
Infosys
January 14, 2019 8
Consolidated Model Sheet of Infosys
FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E
Total revenues USD mn 8,249 8,711 9,501 10,208 10,939 11,798 12,897 14,085
Growth (%) 11.5% 5.6% 9.1% 7.4% 7.2% 7.8% 9.3% 9.2%
Average exchange rate (USD vs INR) 60.7 61.2 65.7 67.1 64.5 70.31 72.00 72.50
% Change 11.3% 0.8% 7.3% 2.1% -3.9% 9.1% 2.4% 0.7%
Total Revenues (Rs mn) 501,330 533,190 624,410 684,850 705,220 828,537 928,572 1,021,175
Growth (%) 24.2% 6.4% 17.1% 9.7% 3.0% 17.5% 12.1% 10.0%
EBIDTA 136,340 149,028 170,780 186,050 190,100 213,656 241,421 267,548
EBIT 122,600 138,338 156,190 169,020 171,480 194,079 222,623 246,103
APAT 106,480 123,328 134,900 143,530 160,280 159,207 181,529 199,201
Margins
EBIDTA Margins(%) 27.2% 28.0% 27.4% 27.2% 27.0% 25.8% 26.0% 26.2%
EBIT Margin (%) 24.5% 25.9% 25.0% 24.7% 24.3% 23.4% 24.0% 24.1%
PBT(%) 29.8% 32.4% 30.0% 29.2% 28.8% 26.8% 27.2% 27.3%
NPM 21.2% 23.1% 21.6% 21.0% 22.7% 19.2% 19.5% 19.5%
Tax Rate 27.2% 28.6% 28.0% 28.0% 20.9% 27.2% 28.0% 28.5%
Diluted EPS 23 27 30 31 35.5 37.5 42.7 46.9
EPS Growth (%) 13.0% 15.8% 9.4% 6.4% 13.1% 5.6% 14.0% 9.7%
P/E 29.8 25.8 23.6 22.1 19.6 18.5 16.3 14.8
P/S 6.1 5.7 5.1 4.6 4.3 3.5 3.1 2.8
EV/EBIDTA 20.1 18.2 16.6 15.0 14.2 12.2 10.6 9.3
ROE(%) 23.9% 24.1% 23.2% 22.0% 23.9% 25.6% 28.7% 27.9%
ROCE(%) 23.9% 24.1% 23.2% 22.0% 23.9% 25.6% 28.7% 27.9%
ROIC(%) 52.3% 48.8% 45.5% 42.5% 43.1% 42.9% 47.1% 48.8%
Consolidated Balance sheet (R mn)
Net Cash on Balance Sheet 292,260 325,860 345,830 389,770 319,810 263,615 320,262 387,526
Net Cash Per Share 64 71 76 85 73 62 75 91
Net Cash per share as a % of stock price 4.8% 5.4% 10.9% 12.3% 10.6% 8.9% 10.8% 13.1%
Consolidated Cash flow ( R mn)
Cash flow from Operations 121,870 107,520 122,430 140,630 145,590 163,974 181,797 202,457
Capex+ acquisitions 27,450 35,290 34,700 27,600 20,250 22,000 22,000 22,000
Free cash flow from operations 94,420 72,230 87,730 113,030 125,340 141,974 159,797 180,457
FCF /EBIDTA 69.3% 48.5% 51.4% 60.8% 65.9% 66.4% 66.2% 67.4%
FCF Yield(%) 3.1% 2.4% 2.8% 3.6% 4.1% 4.9% 5.5% 6.3%
Source: Company, PL
Infosys
January 14, 2019 9
Financials
Income Statement (Rs m)
Y/e Mar FY18 FY19E FY20E FY21E
Net Revenues 705,220 828,537 928,572 1,021,175
YoY gr. (%) 3.0 17.5 12.1 10.0
Employee Cost 432,690 516,128 576,643 633,129
Gross Profit 272,530 312,409 351,929 388,047
Margin (%) 38.6 37.7 37.9 38.0
SG&A Expenses 46,850 54,536 60,357 66,376
Other Expenses - - - -
EBITDA 190,100 213,656 241,421 267,548
YoY gr. (%) 2.2 12.4 13.0 10.8
Margin (%) 27.0 25.8 26.0 26.2
Depreciation and Amortization 18,620 19,578 18,797 21,445
EBIT 171,480 194,079 222,623 246,103
Margin (%) 24.3 23.4 24.0 24.1
Net Interest - - - -
Other Income 31,930 28,180 29,500 32,500
Profit Before Tax 203,410 222,259 252,123 278,603
Margin (%) 28.8 26.8 27.2 27.3
Total Tax 42,420 60,351 70,595 79,402
Effective tax rate (%) 20.9 27.2 28.0 28.5
Profit after tax 160,990 161,907 181,529 199,201
Minority interest - - - -
Share Profit from Associate (710) - - -
Adjusted PAT 160,280 161,907 181,529 199,201
YoY gr. (%) 11.7 1.0 12.1 9.7
Margin (%) 22.7 19.5 19.5 19.5
Extra Ord. Income / (Exp) - - - -
Reported PAT 160,280 161,907 181,529 199,201
YoY gr. (%) 11.7 1.0 12.1 9.7
Margin (%) 22.7 19.5 19.5 19.5
Other Comprehensive Income - - - -
Total Comprehensive Income 160,280 161,907 181,529 199,201
Equity Shares O/s (m) 4,352 4,144 4,144 4,144
EPS (Rs) 36.8 39.1 43.2 47.1
Source: Company Data, PL Research
Balance Sheet Abstract (Rs m)
Y/e Mar FY18 FY19E FY20E FY21E
Non-Current Assets
Gross Block 201,790 223,790 245,790 267,790
Tangibles 201,790 223,790 245,790 267,790
Intangibles - - - -
Acc: Dep / Amortization 100,630 120,208 139,005 160,450
Tangibles 100,630 120,208 139,005 160,450
Intangibles - - - -
Net fixed assets 101,160 103,582 106,785 107,340
Tangibles 101,160 103,582 106,785 107,340
Intangibles - - - -
Capital Work In Progress 22,740 22,740 22,740 22,740
Goodwill 22,110 22,110 22,110 22,110
Non-Current Investments 57,560 57,560 57,560 57,560
Net Deferred tax assets 7,410 7,410 7,410 7,410
Other Non-Current Assets 82,340 84,340 86,340 88,340
Current Assets
Investments 64,070 64,070 64,070 64,070
Inventories 42,610 41,427 46,429 51,059
Trade receivables 131,420 149,818 165,362 181,853
Cash & Bank Balance 198,180 141,985 198,632 265,896
Other Current Assets 43,290 46,290 49,290 52,290
Total Assets 798,900 746,742 832,138 926,079
Equity
Equity Share Capital 10,880 10,360 10,360 10,360
Other Equity 638,350 582,558 660,937 746,946
Total Networth 649,230 592,918 671,297 757,306
Non-Current Liabilities
Long Term borrowings - - - -
Provisions 480 - - -
Other non current liabilities 2,720 2,720 2,720 2,720
Current Liabilities
ST Debt / Current of LT Debt - - - -
Trade payables 29,890 23,511 25,511 27,364
Other current liabilities 111,160 122,183 127,199 133,279
Total Equity & Liabilities 798,900 746,742 832,138 926,079
Source: Company Data, PL Research
Infosys
January 14, 2019 10
Cash Flow (Rs m)
Y/e Mar FY18 FY19E FY20E FY21E Year
PBT 202,700 219,559 252,123 278,603
Add. Depreciation 18,630 19,578 18,797 21,445
Add. Interest - - - -
Less Financial Other Income 31,930 28,180 29,500 32,500
Add. Other (6,390) - - -
Op. profit before WC changes 214,940 239,136 270,921 300,048
Net Changes-WC (1,060) (14,811) (18,529) (18,189)
Direct tax (68,290) (60,351) (70,595) (79,402)
Net cash from Op. activities 145,590 163,974 181,797 202,457
Capital expenditures (16,420) (22,000) (22,000) (22,000)
Interest / Dividend Income - - - -
Others 47,530 - - -
Net Cash from Invt. activities 31,110 (22,000) (22,000) (22,000)
Issue of share cap. / premium (130,410) (82,600) - -
Debt changes - - - -
Dividend paid (74,640) (115,489) (103,150) (113,192)
Interest paid - - - -
Others - - - -
Net cash from Fin. activities (205,050) (198,089) (103,150) (113,192)
Net change in cash (28,350) (56,115) 56,646 67,264
Free Cash Flow 125,610 141,974 159,797 180,457
Source: Company Data, PL Research
Quarterly Financials (Rs m)
Y/e Mar Q4FY18 Q1FY19 Q2FY19 Q3FY19*
Net Revenue 180,830 191,280 206,090 214,000
YoY gr. (%) 5.6 12.0 17.3 20.3
Raw Material Expenses 110,960 118,520 128,170 134,360
Gross Profit 69,870 72,760 77,920 79,640
Margin (%) 38.6 38.0 37.8 37.2
EBITDA 49,300 49,730 53,580 54,100
YoY gr. (%) 2.3 0.9 7.7 1.0
Margin (%) 27.3 26.0 26.0 25.3
Depreciation / Depletion 4,580 4,360 4,640 5,800
EBIT 44,720 45,370 48,940 48,300
Margin (%) 24.7 23.7 23.7 22.6
Net Interest - - - -
Other Income 5,340 7,260 7,390 7,530
Profit before Tax 50,060 49,930 56,330 55,830
Margin (%) 27.7 26.1 27.3 26.1
Total Tax 13,160 13,810 15,230 15,220
Effective tax rate (%) 26.3 27.7 27.0 27.3
Profit after Tax 36,900 36,120 41,100 40,610
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 36,900 36,120 41,100 40,610
YoY gr. (%) 2.4 3.7 10.3 (20.8)
Margin (%) 20.4 18.9 19.9 19.0
Extra Ord. Income / (Exp) - - - -
Reported PAT 36,900 36,120 41,100 40,610
YoY gr. (%) 2.4 3.7 10.3 (20.8)
Margin (%) 20.4 18.9 19.9 19.0
Other Comprehensive Income - - - -
Total Comprehensive Income 36,900 36,120 41,100 40,610
Avg. Shares O/s (m) 2,176 2,176 2,176 2,176
EPS (Rs) 17.0 16.6 18.9 18.7
Source: Company Data, PL Research *Q3FY19 figures are after adjustment of
one off during the quarter.
Key Financial Metrics
Y/e Mar FY18 FY19E FY20E FY21E
Per Share(Rs)
EPS 36.8 39.1 43.2 47.1
CEPS 41.1 43.8 48.3 53.2
BVPS 149.2 143.1 162.0 182.7
FCF 28.9 34.3 38.6 43.5
DPS 17.3 23.1 20.6 22.6
Return Ratio(%)
RoCE 23.9 26.1 28.7 27.9
ROIC 43.1 42.9 47.1 48.8
RoE 23.9 26.1 28.7 27.9
Balance Sheet
Net Debt : Equity (x) (0.4) (0.3) (0.4) (0.4)
Debtor (Days) 68 66 65 65
Valuation(x)
PER 18.6 17.5 15.6 14.2
P/B 4.6 4.8 4.2 3.7
P/CEPS 16.6 15.6 14.1 12.8
EV/EBITDA 14.3 12.3 10.6 9.4
EV/Sales 3.8 3.2 2.8 2.5
Dividend Yield (%) 2.5 3.4 3.0 3.3
Source: Company Data, PL Research
Infosys
January 14, 2019 11
Price Chart Recommendation History
No. Date Rating TP (Rs.) Share Price (Rs.)
1 15-Jan-18 BUY 1,220 1,080
2 13-Apr-18 BUY 1,230 1,169
3 13-Apr-18 BUY 1,220 1,169
4 10-Jul-18 BUY 1,400 1,354
5 13-Jul-18 BUY 1,430 1,317
6 5-Oct-18 BUY 790 707
7 16-Oct-18 BUY 790 695
8 7-Jan-19 BUY 790 672
Analyst Coverage Universe
Sr. No. CompanyName Rating TP (Rs) Share Price (Rs)
1 Cyient BUY 810 609
2 HCL Technologies Accumulate 1,100 942
3 Hexaware Technologies Accumulate 430 332
4 Infosys BUY 790 672
5 L&T Technology Services Accumulate 1,780 1,637
6 Mindtree BUY 1,140 835
7 Mphasis Accumulate 1,220 925
8 NIIT Technologies BUY 1,460 1,141
9 Persistent Systems Accumulate 725 570
10 Redington (India) BUY 140 86
11 Sonata Software BUY 410 296
12 Tata Consultancy Services Accumulate 2,275 1,889
13 TeamLease Services Hold 2,740 2,884
14 Tech Mahindra BUY 885 688
15 Wipro Accumulate 350 324
16 Zensar Technologies BUY 290 229
PL’s Recommendation Nomenclature (Absolute Performance)
Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
437
515
593
672
750
Jan
-16
Jul-
16
Jan
-17
Jul-
17
Jan
-18
Jul-
18
Jan
-19
(Rs)
Infosys
January 14, 2019 12
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