“We met Mr. Abraham Matthews (Head Finance, Infosys BPO) to understand the demand environment for both, BPO and Infosys. The management is confident of achieving guidance despite the cross-currency impact. Moreover, the currency benefit has given them a scope for wage hike. The increased likelihood of inorganic growth and low expectation gives the comfort for a “BUY” rating.”
“The management was confident of delivering growth stronger than overall growth of (8-10%), excluding ~US$30m contribution from the acquisition. BPO (FY12: US$384m, 5.5%) is seeing good traction from BFSI, Retail-CPG and Healthcare. Few deals involve rebadging of clients’ employees; hence, margin benefit due to currency depreciation would be lower-than-expected. Portland acquisition resulted in one up-selling opportunity. Due to cross-currency headwind, the performance in Q1FY13 will be in-line with the guidance. The management could calibrate guidance (by 0-1% downward) to adjust the crosscurrency movement. However, our discussion with the management didn’t hint for the same.”
“The currency movement has been supportive for margins despite headwind from cross-currency. The management is likely to give a wage hike, which was due in Q1FY13. But, the currency movement will give impetus to the margin. As highlighted (“Time to BUY” April 24, 2012), the consensus is overlooking margin levers; hence, expect 5-7% upgrade in EPS, post Q1FY13 result. Management cited urgency for inorganic route to build non-linear momentum. The size of acquisition is likely to be at US$100-200m. The management continues to maintain their back-ended growth commentary inline with global tech majors. The valuation comfort and low expectation leaves little room for a negative surprise; hence, retain “BUY”,” says Prabhudas Lilladher research report.
No comments:
Post a Comment