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Infy Q308 Results – EPS growth 22%

Infy’s Q308 Results are out: (all comparisons are year-on-year)

  • Revenue up 17% to 4271 cr. (consolidated).
  • Net profit is up 25% to 1231 cr. (from 980 cr.)
  • EPS is up 22% to Rs. 21.54. This includes a one time tax reversal of 50 cr., without which the EPS would be 20.66, a 17% growth YoY.
  • Guidance for FY08 (ending March 31, 2008) is an EPS of 81.
  • The current price of Infy is 1600, which translates to a P/E of 20 or so.
  • Not stellar results by any standards, but better than I expected. The EPS guidance is actually higher than I expected, at around 81 (versus some 79 as of last quarter) and earnings seem robust.
  • Retention or hiring seems to have improved. Of 11,000 odd hires, they’re had a net addition of 8000 or so. The overall utilisation is less than 70%, a 1% drop (that’s about 880 employees really).
  • BFSI forms 38% of revenues. A US recession will hit this sector the highest.

Results seem to show that Infy seems fairly valued at current prices. Even after falling 20% from the last results time it doesn’t seem like a value buy, on earnings. They have 7700 cr. in cash, and the only way they can really propel themselves up is to utilise it properly. They make about 150 cr. profit per quarter purely on interest from FDs, which amounts to nearly 1/8ths of their quarterly profit! I would rather that they use it in business and improve the return on that capital instead.

Also note: My earlier post on Infy’s option action being significant is of no value. The results are not spectacular on the upside or downside. This could just be result based buying, and the option writers would have made a killing.

Disclosure: No current positions.

  • kram says:

    >How exactly do you propose they use the Rs.7700 Crores “in Business” seeing how the recession (currently in the US – 60% of their income stream – and subsequently worldwide) is going to affect IT revenues significantly in the next few quarters or even years? Easier said than done!

    Also, (not trying to be rude, but) repeating data and a few minor computed values does not make for a meaningful or comprehensive analysis. Looks impressive but does not carry much weight. Since you are at it seriously, how about presenting various investment ratios (OVER TIME), like ROE, RONW, ROCE and so on? The key part of analysis is to study trends and extrapolate over time. Standalone figures do not indicate trends. Just trying to help.

  • Deepak Shenoy says:

    >kram: They need to get their act together and acquire, acquire, acquire. And they need to hedge properly, not this half hearted, quarterly hedge they do (ridiculous!)

    I would like to qualify: I’m not a deep value analyst. I don’t know what to do with terms such as RONW (makes little sense to me) ROCE is interesting but as I’ve noted in the past, not entirely tradeable. Balaji telefilms had at one point more than 30% of its stock price in cash holdings, which didn’t mean anythign for years. (Still doesnt!)

    This was not supposed to be a comprehensive analysis. I have certain things I feel about Infy and the IT sector in general, but those again are viewpoints, not analysis. To analyse Infy on a deep value fundamental basis (think Graham or Buffett types) you might want to visit Equitymaster or some deep value folks – I’m more of a short-medium term person.

  • kram says:

    >Forgot to add a couple of things. Let us not forget that IT has the most direct exposure the the US economy. Back in early 2007 I had sold off ALL infosys shares (based on the impending slowdown/recession we were already seeing then as well as impact of longer-term factors like tax on income). Target was 1200 for the share in 3 years time. Recently, seeing how the recession look much more severe now, we are revising Infosys price to sub-1000.

    Long-term, once the P/E ratios decline to very attractive levels and profit declines bottom out and the US Economic decline also bottoms out (we estimate that to be around 2010 – 2012), IT companies will be great buys as the next Bull Market will be an even bigger one than the last. It will be then that the 7700 crores will come in very handy to buy up customers and buy out competition.

    Disclosure: I have been in the IT Exports business for 22 years (still design & code 🙂 and the Stock Markets for 21 years. Bought large quantities of Infosys at Rs.120 post IPO!


  • kram says:

    Your Blog is the first Indian one I have found to be balanced, mature and serious (unlike the many that only have silly banter and only clutter up the Net!).

    Do not assume that you are not capable of deep analysis. If you try, you might surprise yourself :).

    By continuously improving on depth of analysis and understanding you will only be significantly improving value to your readers and your own “brand” in the community.

    Keep up the good work and I will pitch in with tons more of facts, figures and opinion.