Please refer to important disclosures at the end of this report 1 Y/E March ( ` cr) 4QFY13 3QFY13 % chg (qoq) 4QFY12 % chg (yoy) Net sales 464 475 (2.2) 417 11.3 EBITDA 79 88 (10.2) 83 (4.4) EBITDA margin (%) 17.0 18.5 (151)bp 19.8 (279)bp Net profit 54 62 (12.3) 71 (24.1) Source: Compan y, Angel Research For 4QFY2013, Infotech Enterprises (Infotech) reported a weak set of results on the operating front. The company witnessed challenges in two of its top 10 client accounts. The Management sounded confident of FY2014 turning out to be a better year than FY2013 and plans to hire ~2,500 gross employees with ~15% planned attrition. We maintain our Accumulate rating on the stock. Quarterly highlights: For 4QFY2013, Infotech reported a revenue of US$85.9mn, down 1.9% qoq, majorly impacted by ramp downs seen in a couple of customer accounts in the America geography - one in heavy engineering and one in hi-tech industry verticals. In INR terms, the revenue came in at `464cr, down 2.2% qoq. The EBITDA and EBIT margins declined by 151bp and 232bp qoq to 17.0% and 12.8%, respectively, due to muted volume growth and inch up in employee costs on account of the gross addition of 783 employees into the system. The PAT came in at `54cr, down 12.3% qoq, impacted by lower other income of `10cr as against `16 in 3QFY2013. Outlook and valuation: The Management sounded confident of FY2014 turning out to be a better year than FY2013. For FY2014, in the ENGG vertical, the Management indicated at a robust deal pipeline in the aerospace business, and is seeing strong signs of growth in the transportation business segment owing to recovery in the transportation industry. Further, the Management cited that it is seeing initial signs of recovery in the hi-tech business segment while heavyengineering is still looking soft. In the UT&C vertical, for FY2014, the Management indicated at a strong pipeline for the utilities business segment; in the telecom business segment, it expects business to remain stable with growth lower than the company’s average growth rate. Over FY2013-15, we expect the company to post a USD and INR revenue CAGR of 8.0% and 7.7%, respectively. We value the company at 8.5x FY2015E EPS of ` 21.9, which gives us a target price of ` 185; we maintain our Accumulate view on the stock. Key financials (Consolidated) Y/E March ( ` cr) FY2011 FY2012 FY2013E FY2014E FY2015E Net sales 1,188 1,553 1,873 1,956 2,174 % chg 24.6 30.7 20.6 4.4 11.1 Net profit 140 163 233 227 243 % chg (18.3) 16.7 42.9 (2.6) 7.1 EBITDA margin (%) 15.2 17.4 18.2 17.9 17.7 EPS ( ` ) 12.6 14.5 20.7 20.4 21.9 P/E (x) 13.0 11.3 7.9 8.0 7.5 P/BV (x) 1.7 1.5 1.4 1.2 1.0 RoE (%) 13.4 13.6 17.6 14.7 13.7 RoCE (%) 12.6 18.5 20.9 18.3 17.4 EV/Sales (x) 1.2 0.8 0.7 0.6 0.4 EV/EBITDA (x) 7.6 4.8 3.7 3.1 2.4 Source: Compan y, Angel ResearchACCUMULATE CMP `164 Target Price `185 Investment Period 12 Months Stock Info Sector Net debt ( `cr) (498) Bloomberg Code Shareholding Pattern (%) Promoters 22.4 MF / Banks / Indian Fls 6.3 FII / NRIs / OCBs 29.7 Indian Public / Others 41.7 Abs. (%) 3m 1yr 3yr Sensex (3.5) 13.2 9.7 Infotech (4.9) 2.5 (14.6) INFTC@IN 19,407 5,916 INFE.BO 52,678 BSE Sensex NiftyReuters Code Face Value ( `) IT Avg. Daily Volume Market Cap ( `cr) Beta 52 Week High / Low 1,834 0.3 5 211/150 Ankita Somani +91 22 3935 7800 Ext: 6819 [email protected]Infotech Enterprises Performance Highlights4QFY2013 Result Update | IT April 25, 201 3
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clients is a heavy equipment client which announced furloughs, thereby impacting
a significant part of the engagement; and another being a semiconductor
customer which announced exit in two key areas of the company’s engagement,
resulting in sudden ramp-down of the contract. This resulted in a 2.1% and 2.4%qoq decline in revenues in USD and INR terms qoq, respectively, in the HTH (hi-
tech, transportation and heavy engineering) business segment. Overall the
company added 11 new clients in the ENGG vertical.
Exhibit 5: ENGG vertical – Revenue growth trend
Source: Company, Angel Research
Hiring and utilization
During 4QFY2013, Infotech added 383 net employees, taking its total employee
base to 10,517. The UT&C vertical witnessed an addition of 415 net employees,
taking its employee base to 5,076 while the ENGG vertical saw a reduction in its
employee base by 37 employees, taking its total employee base to 4,721. The
company’s attrition rate (annualized basis) inched up to 17.5 in 4QFY2013 from
15.5 in 3QFY2013.
Exhibit 6: Trend in hiring
4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Net additions
UT&C 54 322 88 66 415ENGG 93 111 191 (52) (37)
Support (10) 31 16 27 5
Total employees
UT&C 4,185 4,507 4,595 4,661 5,076
ENGG 4,508 4,619 4,810 4,758 4,721
Support 641 672 688 715 720
Source: Company, Angel Research
The utilization level for the UT&C vertical declined by ~100bp qoq to 82% due to
strong net employee additions, while utilization level for the ENGG vertical
For 4QFY2013, the EBITDA and EBIT margins of the company declined by 151bp
and 232bp qoq to 17.0% and 12.8%, respectively. The company’s operating
margin faced headwinds from a muted volume growth and healthy gross addition
of 783 employees into the system. The Management indicated that the company is
planning to give wage hike to employees (quantum not disclosed), effective from
1QFY2014, which is expected to impact 1QFY2014’s operating margins by
~250-300bp.
Exhibit 8: Trend in margins
Source: Company, Angel Research
Outlook and valuation
The company has been making investments to strengthen its product portfolio and
taking initiatives to improve its financial metrics. The Management sounded
confident of FY2014 turning out to be a better year than FY2013. The company
plans to hire ~2,500 gross employees with ~15% planned attrition. For FY2014,in the ENGG vertical, the Management indicated at a robust deal pipeline in the
aerospace business segment and sees strong signs of growth in the transportation
business segment owing to recovery in the transportation industry. The
Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Infotech Enterprises
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
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