shares information on computers software companies Infosys technologies

Infosys Technologies Ltd (updated - 13 Jan 2010)
Infosys Technologies’ December 2009 quarter results not only outshone the Street’s expectations and its own guidance but, also indicated that the future looks brighter. Not surprisingly, Infosys stock surged four per cent and pushed up the IT index by a similar margin, on aday when the Sensex fell by about half a per cent.

With demand reviving, volumes were up by 6.1 per cent. The company’s strategy to cross-sell and provide value enhancing services to its customers helped it garner higher revenues (up 12.2 per cent) from its top 10 clients, which saw the latter’s contribution to revenues reach the highest in the last three quarters. Overall, good traction from North American customers and the banking and financial services (BFSI) segment coupled with steady pricing environment helped Infosys report a 6.8 per cent sequential growth in revenues, which is the highest in the last seven quarters.

While North America saw its share in revenues grow further, the recovery in the European region is expected to come with a lag-effect; here, improving prospects in Germany and France provides some comfort for the future.

At the operating level, profit margins improved by around 90 basis points to 35.5 per cent on account of pricing stability and better utilisations. The employee utilisation rate (excluding trainees) improved 300 basis points to 76.2 per cent and added about 80 basis points to margins. Notably, there is scope to improve this further, which could help mitigate any margin pressures going ahead. However, the strengthening of rupee by 3.6 per cent during December quarter impacted overall margins by 120 basis points. Going ahead, unfavourable currency movements, salary hikes and an increase of hiring targets put together could put some pressure on the margins. On these counts, the management expects margins to decline by about 150 basis points in the March 2010 quarter.

At the net level, increased tax provisioning due to higher proportion of revenues accruing from delivery centres outside India and non-STP (within India) areas, restricted profit growth to 2.7 per cent in the December quarter (profit before tax was up by 5.2 per cent).

Going ahead, with pricing environment stable and customers taking decisions faster, the ongoing global economic recovery suggests that the demand environment should improve further. The management has also indicated that large deals are returning; it won a$200 million deal in the quarter. Even as IT budgets are yet to be finalised, the up-tick in Infosys’ full-year guidance instils confidence of better days ahead. At Rs 2,587, the stock is trading at 24.2 times its 2009-10 earnings estimates, and may be considered on dips.
source - BS

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Infosys Technologies Ltd (updated - 14 April 2010)
The quarterly results of Infosys Technologies were ahead of its own guidance, but more or less mirrored street expectations.

While revenue growth was better at 3.54 per cent sequentially (over December 2009 quarter) to Rs 5,944 crore, its largest market, US, which contributes around three-fifth of revenues, grew at a slower pace of 2.8 per cent. Contrarily, the Europe region that saw flat revenues in the December quarter grew 8 per cent. Even though Infosys management sounded cautious, as clients are not keen to take long-term spending decisions as yet, its dollar-denominated revenue growth guidance of 16-18 per cent for 2010-11 brought some cheer.

Among business verticals, banking and financial services maintained its momentum, while turnaround in the manufacturing space also chipped in better growth rates. Revenue growth in these two verticals ranged 7-9 per cent sequentially and helped offset the lacklustre performance of other verticals.

The rupee’s appreciation by 1.6 per cent in the quarter affected margins by about 70 basis points. This, along with increased hiring and salary hikes announced last year, dented profitability. Overall, operating margins slipped by about 100 basis points to around 34 per cent, while operating profits grew a mere 0.3 per cent in the fourth quarter. Higher other income, profit on sale of investments of Rs 48 crore and lower tax outgo helped net profits rise 2.6 per cent to Rs 1,600 crore during the quarter.

With an improvement in the business environment and the need to control attrition levels (that rose 180 basis points sequentially to 13.4 per cent), the company has raised employee salaries by an average 14 per cent from April 2010. It is also targeting to add 30,000 employees in 2010-11, about 11 per cent more than it did in 2009-10, to drive growth.

Going ahead, Infosys is factoring a 6 per cent rupee appreciation in 2010-11. In conjunction with wage inflation, this may pressurise margins in future. However, improvement in the employee-utilisation rates (excluding trainees) by about 150-200 basis points from the current 77.1 per cent and other cost-cutting measures should offset some of these pressures. Overall, the company expects a net erosion of about 150 basis points in margins during 2010-11, which along with a higher effective tax rate will restrict profit growth. For the full year, Infosys guided a muted growth in earnings per share to Rs 111. At Rs 2,782.35, up almost Rs 100 over Monday’s closing, the stock is trading at 25 times 2010-11 earnings and is not cheap.
source - business standard

Infosys: Limited upside from here (updated - 14 July 2010)
The Infosys scrip seems to have run out of steam. The stock is off the 52-week high of Rs 2,911 it touched on Monday. With aconsensus estimate of Rs 122 earnings per share (EPS) in FY11, the price to earnings is pegged at 23 times, say analysts. This is a premium of 15-20 per cent to the market, and is likely to be maintained, as the company continues to generate free cash flows and has a return-on-equity of around 30 per cent. Not many companies which expect revenue to grow at a compounded rate of 20 per cent in the next three years would have these numbers.

However, the upside movement for the stock is seen to be limited. Operating profits margins, around 31.6 per cent, are lower by 251 basis points over the year-ago quarter, but are among the highest when compared to peers like TCS and Wipro. Given this, there is little headway for margin expansion. Utilisation rates have risen from 69.3 per cent (including trainees) in the December 2009 quarter to 73 per cent (78 per cent if trainees are excluded). The management says the best the company has recorded has been around 81 per cent. This means there is little room for increasing productivity, not to mention a rising attrition rate.

Given a scenario where pricing levels are seen almost flat, margins will be under pressure. Currency fluctuations, which knocked 90 basis points off profit margins, will continue to put additional stress. Volume growth is, therefore, expected to bring some solace. The management has guided a higher 1921 per cent revenue growth in constant currency terms for the current financial year. Moreover, analysts reckon that a change in the product mix, with a higher share of consultancy (25 per cent of revenues), could add the surprise factor, as it is a highmargin business compared to application development and maintenance.

A depreciating rupee will also be another trigger. Analysts at Citi reckon, “We believe EPS upgrades (barring currency-related), if any, are unlikely to be seen until the September quarter results.”
source - business standard