Result Update

April 18, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Infosys (INFTEC)

Buy
| 1400
12 months
13%

Inspiring guidance

Whats Changed?
Target
EPS FY17E
EPS FY18E
Rating

Changed from | 1,350 to | 1,400

Unchanged
Introduced at | 74.0
Unchanged

Quarterly Performance
Revenue
EBIT
EBIT (%)
PAT

Q4FY16
16,550
4,220
25.5
3,597

Q4FY16
13,411
3,449
25.7
3,098

YoY (%)
23.4
22.4
-22 bps
16.1

Q3FY16
15,902
3,959
24.9
3,464

QoQ (%)
4.1
6.6
60 bps
3.8

Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY15
53,319
14,901
12,329
53.9

FY16
62,441
17,078
13,491
59.0

FY17E
70,290
19,459
15,306
67.0

FY18E
79,730
22,065
16,905
74.0

FY15
23.0
26.0
16.9
5.2
22.5
31.4

FY16
21.0
23.7
14.4
4.6
21.9
30.3

FY17E
18.5
20.9
12.4
4.1
22.1
30.9

FY18E
16.8
18.9
10.6
3.6
21.8
30.6

Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (March-16)
Cash and Investments (March-16)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
283,187.8
| 0 crore
34,468.0
248,719.8
1248 / 933
| 1144 crore
|5

Price performance (%)

TCS
Infosys
Wipro
HCL Tech

| 1239

1M

3M

6M

12M

(4.5)
(1.5)
(2.5)
(3.8)

(12.5)
(5.5)
(6.7)
(4.9)

(8.3)
13.2
(0.7)
(12.1)

(9.6
0.3
(2.0
3.3

Research Analysts
Abhishek Shindadkar
abhishek.shindadkar@icicisecurities.com
Tushar Wavhal
tushar.wavhal@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Infosys reported steady Q4FY16 earnings as dollar revenue growth

and EBIT margins were in line with our estimates while FY17E
revenue growth guidance was ahead of consensus estimates
US$ revenues grew 1.6% QoQ to $2,446 million, in line with our
1.8% growth and $2,450 million estimate
Infosys expects FY17E revenues to grow 11.5-13.5% in constant
currency terms and 11.8-13.8% in US$ terms to $10,622-10,812
million. Rupee revenues could grow 12.7-14.7% aided by currency
tailwinds (66.26 assumed in guidance vs. 65.69 FY16 average)
Reported PAT of | 3,597 crore was in line with our | 3,620 crore
estimate
Quarterly growth led by volumes offset by pricing
Infosys reported encouraging earnings in a seasonally soft quarter.
Sequentially, dollar revenues grew 1.6% led by volumes (2.4%) partially
offset by a drop in price realisation (110 bps). Volume growth was led by
ramp-ups in new accounts and new wins in existing accounts.
Guides above consensus led by strong bookings
Infosys guided for 11.5-13.5% growth in constant currency terms in
FY17E while dollar revenues could grow 11.8-13.8% and implies CQGR of
3.3-4%. Guidance beat was led by ~45% YoY increase in large deal TCV
bookings to $2.8 billion in FY16 vs. $1.9 billion in FY15. Further, the
company aims to achieve quarterly run rate of $1 billion in TCV signings
in the next couple of quarters. We expect FY17E dollar revenues to grow
12.1% led by healthy deal wins, improved win rates, better execution and
top account mining. We have also introduced FY18 estimates and expect
dollar revenues to grow 11.7% YoY.
Margins in line and within stated band
Q4FY16 EBIT margins increased 60 bps QoQ to 25.5% and were
marginally above our 50 bps improvement and 25.4% estimate. The
margin increase for the quarter was led by utilisation (20 bps), drop in
sub-contractor cost (20 bps) and rupee depreciation (60 bps) partially
offset by a drop in price realisation (40 bps). Infosys expects EBIT margins
to range at 24-26% in FY17E and would reinvest efficiency gains into
rebuilding sales efforts and capability in newer technologies.
Standalone attrition at 16 quarter low
Consolidated annualised attrition declined 80 bps QoQ to 17.3% vs.
18.1% in Q3 while standalone annualised attrition declined 80 bps QoQ to
12.6% vs. 13.4% in Q3 and is at a 16 quarter low. The management
highlighted that employment engagement initiatives are resonating well
with employees leading to a moderation in attrition.
Introducing FY18E; raising target price
We estimate Infosys will report revenue, PAT CAGR of 13%, 12%,
respectively, in FY16-18E (with average 25.5% EBIT margins in FY17-18E),
slower than 17.8%, 14.6% reported in FY11-16 along with average 26.5%
margins. Over time, the earnings trajectory could improve further as
strategic initiatives (such as top account mining, large deal wins, lower
attrition and improving per-capita productivity) of the new management
are bearing early fruits. We now value Infosys at 19x its FY18E EPS of
| 74 (20x its FY17E EPS earlier) to arrive at our revised target price of
| 1,400 (| 1,350). Lower multiple is to account to longer time horizon.

Variance analysis
Q4FY16 Q4FY16E
Revenue
Employee expenses
Gross Margin
Gross margin (%)
Selling & marketing costs
G&A expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT

EBIT Margin (%)

Other income
PBT
Tax paid
PAT

Q4FY16

YoY (%)

Q3FY16

16,550
9,843

16,528
9,923

13,411
7,891

23.4
24.7

15,902
9,621

6,707
40.5
909
1,159
4,639
28.0
419
4,220

6,605
40.0
888
1,140
4,577
27.7
374
4,203

5,520
41.2
736
1,052
3,732
27.8
283
3,449

21.5
-63 bps
23.5
10.2
24.3
20 bps
48.1
22.4

6,281
39.5
859
1,094
4,328
27.2
369
3,959

25.5
772
4,991
1,394
3,597

25.4
777
4,980
1,360
3,620

25.7
881
4,330
1,232
3,098

-22 bps
-12.4
15.3
13.1
16.1

24.9
802
4,761
1,296
3,464

Key Metrics
Closing employees
194,044 193,700
LTM attrition-standalone (%)
13.6
13.8
Utilisation - IT Services (%)
80.1
81.0
Average $/|
67.7
67.5
Source: Company, ICICIdirect.com Research

176,187
18.9
78.6
59.9

10.1
-533 bps
150 bps
13.1

193,383
13.8
80.6
66.1

QoQ (%)

Comments
Revenue growth was in line with our estimates led by robust volumes (2.4%),
4.1 offset by pricing realisations (-1.1%)
2.3

6.8
103 bps
5.8
5.9
7.2
81 bps
13.6
6.6
EBIT margin improvement was led by increase in utilisation (20 bps), drop in subcontractor cost (20 bps) and rupee depreciation (60 bps) and was marginally
60 bps above our estimates
-3.7
4.8
7.6
3.8

0.3 Net additions of 661 QoQ

-20 bps Attrition at 16 quarter low
-50 bps
2.5

Change in estimates
(| Crore)

Old

FY17E
New % Change

Revenue
69,960
70,290
EBIT
17,831
17,947
EBIT Margin (%)
25.5
25.5
PAT
15,315
15,306
EPS (|)
67.0
67.0
Source: Company, ICICIdirect.com Research

Old

0.5
0.7
0 bps
-0.1
0.0

FY18E
New % Change

Comments
Infosys expects constant currency revenue to grow 11.5-13.5% in constant currency
terms while US$ revenues could grow 11.8-13.8% led by healthy order booking

79,730
20,310
25.5
16,905
74.0

Infosys guided for target margin band of 24-26%

Assumptions
FY15
Closing employees
176,187
18.9
LTM attrition-standalone
Utilisation - IT Services (%
76.4
Average $/|
54.5

FY16
194,044
17.2
80.9
65.7

Current
FY17E
210,818
13.0
83.1
66.0

FY18E
225,628
11.0
84.3
67.0

Earlier
FY17E
207,765
14.5
82.7
66.0

Comments
FY18E
Lower attrition could lead to higher net adds
Attrition could see a sharp drop in FY17E

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

Company Analysis
Operating metric highlights
From a vertical perspective, growth was led by ECS (20% of revenues,
4.6% QoQ growth in dollar terms), RCL (24.5%, 2.4%) and manufacturing
& hi-tech (22.7%, 1%). BFSI (32.8%, -0.3%) was primarily weak due to
insurance vertical.
Across geographies, North America (61.9% of revenue) grew 0.6% QoQ
while Europe (23.4%) grew 2.5%. India recovery continues (8.9% on top
of 20.4% QoQ growth in Q3) while Rest of the World was okay (3.4% vs.
0.6% in Q3).
Application development declined sequentially after a good Q3 (1.3%
QoQ decline vs. 1.3% in Q3) while app maintenance recovered and
increased 4.8% QoQ vs. 1.9% decline in Q3. Growth drivers for the
quarter were IMS (8% of revenues, 8.4% QoQ decline), PES (3.4%, 3.7%),
and products (3.2%, 8.4%) while testing services (9%, -0.6%) and ADM
were particularly weak.
From a client perspective, top customer revenues increased 4.5% QoQ
(after reporting 4.8% QoQ decline in Q3) but grew 16.5% YoY (above
company average growth of 13.3%). Top 2-5 customer revenues grew
0.2% QoQ and 11.7% YoY while 6-10 customer revenues declined 0.2%
QoQ but grew 8.8% YoY.
Demand trends across verticals
From a demand perspective, energy continues to be volatile. Infosys does
not expect significant changes in the spending pattern in FY17E. Telecom
was challenged in FY16 but saw a demand uptick in Q4FY16. Further,
Infosys is witnessing early signs of traction in the telecom space. Demand
continues to be good across retail, CPG, manufacturing and healthcare &
life sciences verticals. Within manufacturing, aerospace could witness
some softness. Infosys is seeing a decent pipeline across a majority of
verticals and geographies including Europe and North America.
Guides above consensus led by strong bookings
Infosys guided for 11.5-13.5% growth in constant currency terms in
FY17E while dollar revenues could grow 11.8-13.8% and implies CQGR of
3.3-4%. Guidance beat was led by ~45% YoY increase in large deal TCV
bookings to $2.8 billion in FY16 vs. $1.9 billion in FY15. Further, the
company aims to achieve quarterly run rate of $1 billion in TCV signings
in the next couple of quarters. We expect FY17E dollar revenues to grow
12.1% led by healthy deal wins, improved win rates, better execution and
top account mining. We have also introduced FY18 estimates and expect
dollar revenues to grow 11.7% YoY.

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 1: Dollar revenues may grow at 11.9% CAGR in FY16-18E vs. 9.5% CAGR in FY11-16
30.0

14000
25.8

12000

25.0
20.0
15.8

9.1 12.1

11.715.0
10.0

10650

11900
FY18E

2446
Q4

FY17E

2407
Q3

2256
Q1

2392

8711
FY15

Dollar revenue

Q2

2159
Q4

2133
Q1

2218

8249
FY14

Q3

7398

FY13

2201

6994
FY12

5.8

13.3

5.8

3.2 5.6

Q2

6041

FY11

2000

8.7 8.5

7.1 6.5 5.6

3.0
4804

4000

11.5

9501

6000

FY16E

8000

FY10

$ billion

10000

5.0
0.0

Growth, YoY

Source: Company, ICICIdirect.com Research

Exhibit 2: Though Infosys has grown slower than industry average in past six of previous seven
years, FY17E could be different
35
27

25.8
20.0

19

19.0
18.7
15.8 16.5
17.0

16.0
11.6

11
3.0

3
-5
FY09

5.5

-4.9
FY10

Growth, YoY

FY11

FY12

13.0
11.5
10.2
9.0
8.0
5.8

FY13

Company guidance (mid-point)

FY14

12.5
13.0 12.1
11.0
7.0
5.6

FY15

FY17E

NASSCOM guidance (mid-point)

Source: Company, ICICIdirect.com Research

Client metric continues to be steady

Client additions and order bookings continue to be healthy as Infosys
added 89 clients during the quarter taking the active client base to 1,092
compared to 950, 890 in FY15, FY14 end, respectively. Across bands, two
clients transitioned to $75-100 million bucket, one to $100-200 million,
seven to $10-25 million and one to $5-10 million. Overall, $1 million+
customers increased by three to 558 vs. 555 in Q3. Revenue per FTE for
consolidated business increased 0.4% QoQ to $50,700 vs. $50,500 in Q3
but declined 3.1% YoY. The aspirational target of the management is to
achieve revenue per FTE of $80,000 by 2020. Quarterly revenue per
customer declined to $2.24 million vs. $2.30 million in Q3 and $2.37
million, $2.29 million, $2.27 million, $2.38 million in Q2FY16, Q1FY16,
Q4FY15, Q3FY15, respectively. Large deal signings continue to be healthy
as Infosys signed six deals worth $757 million in total contract value (TCV)
during the quarter leading to order bookings of ~$2. 8 billion in TCV in
the last 12 months.

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 3: Client contribution $1 million+ increases by 3 to 558

520

526

532

529

529

535

542

555

558

501

FY10 FY11 FY12 FY13 FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

Q3

Q4 FY16E

600
500

400

338

366

399

448

558

300
200
100
0

Clients contributing $1 million+

Source: Company, ICICIdirect.com Research

Margins in line and within stated band

Q4FY16 EBIT margins increased 60 bps QoQ to 25.5% and were
marginally above our 50 bps improvement and 25.4% estimate. The
margin increase for the quarter was led by utilisation (20 bps), drop in
sub-contractor cost (20 bps) and rupee depreciation (60 bps) partially
offset by a drop in price realisation (40 bps). Infosys expects EBIT margins
to range at 24-26% in FY17E and would reinvest efficiency gains into
rebuilding sales efforts and capability in newer technologies.
Exhibit 4: We expect FY17E margins to increase 50 bps YoY to 25.5%
35

29

29.5 29.0
25.8

26

24.0

25.1

26.1

26.7

25.7 25.9

25.5
24.0

24.9

25.5 25.0 25.5 25.5

Q4

30.4

Q3

32

23

EBIT

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

FY18E

FY17E

FY16E

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

20

Exhibit 5: Moderation in attrition testimony to managements employee engagement initiatives

25
22
18.7

19
16

17.0
15.4

19.5

20.1 20.4

18.9 18.9
17.2

16.7

16.3

15.0

13.4

13.8 13.6

13.0

13

11.0
FY18E

FY17E

FY16E

Q4

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

10

LTM attrition - standalone

Source: Company, ICICIdirect.com Research

Exhibit 6: Utilisation improvement may be key margin lever in FY17E

80.2

81.3

80.6 80.1 81.0

84.3

78.6

78.2

79
%

80.9

80.1

Q3

82
76.4

76
73

83.1

82.3 82.7

Q2

85

74.2
72.6
70.7

Utilisation - IT Services (ex-trainees)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

FY18E

FY17E

FY16E

Q4

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

70

Outlook and valuation

Infosys reported steady Q4FY16 earnings as dollar revenue growth and
EBIT margins were in line with our estimates. Growth was led by ECS,
RCL, verticals, India geography and app development, consulting services
while manufacturing, retail, the US and IMS were weak. Infosys expects
its FY17E constant currency revenue growth guidance at 11.5-13.5% (1012% in FY16) and its US$ revenue growth guidance at 11.8-13.8% (6.48.4%) led by visibility and beat in prior quarters and suggests execution is
in sync with its strategic vision.
We estimate Infosys will report revenue, PAT CAGR of 13%, 12%,
respectively, in FY16-18E (with average 25.5% EBIT margins in FY17-18E),
slower than 17.8%, 14.6% reported in FY11-16 along with average 26.5%
margins. Over time, the earnings trajectory could improve further as
strategic initiatives (such as top account mining, large deal wins, lower
attrition and improving per-capita productivity) of the new management
are bearing early fruits. We now value Infosys at 19x its FY18E EPS of
| 74 (20x its FY17E EPS earlier) to arrive at our revised target price of
| 1,400 (| 1,350). Lower multiple is to account to longer time horizon.
Exhibit 7: One year forward rolling PE
1800
1500
1200
900
600
300

Price

26

22

18

14

Apr-16

Oct-15

Apr-15

Oct-14

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Oct-11

Apr-11

Oct-10

Apr-10

Oct-09

Apr-09

Oct-08

Apr-08

Oct-07

Apr-07

10

Source: Company, ICICIdirect.com Research

Exhibit 8: Valuation

FY15
FY16E
FY17E
FY18E

Sales
(| cr)
53,319
62,441
70,290
79,730

Growth
(%)
6.4
17.1
12.6
13.4

EPS
(|)
53.9
59.0
67.0
74.0

Growth
(%)
15.8
9.4
13.5
10.4

PE
(x)
23.0
21.0
18.5
16.8

EV/EBITDA
(x)
16.9
14.4
12.4
10.6

RoNW
(%)
22.5
21.9
22.1
21.8

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

RoCE
(%)
31.4
30.3
30.9
30.6

Company snapshot
1,500

Target price : | 1400

1,200
900
600
300

Jan-17

Mar-17

Nov-16

Jul-16

Sep-16

May-16

Jan-16

Mar-16

Sep-15

Nov-15

Jul-15

Mar-15

May-15

Jan-15

Nov-14

Jul-14

Sep-14

May-14

Jan-14

Mar-14

Nov-13

Jul-13

Sep-13

May-13

Jan-13

Mar-13

Sep-12

Nov-12

Jul-12

Mar-12

May-12

Jan-12

Sep-11

Nov-11

Jul-11

May-11

Jan-11

Mar-11

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Apr-11

Event
The company exceeds its annual guidance; guides for 18-20% in FY12

Apr-12

Infosys names SD Shibulal as new Chief Executive Officer till 2015

Sep-12

Infosys considers buying Lodestone for $350 million to boost its consulting service offering

Apr-13

Company misses Q4 sales estimates and provides lower revenue guidance (6-10%) compared to Nasscom average of 12-14%

Jun-13

Narayana Murthy appointed Executive Chairman of the company

Jul-13

The company reports better-than-expected dollar revenue growth and operating margin

Oct-13

Infosys posts better-than-expected growth for second consecutive quarter. Raises guidance to 8-10%

Mar-14

Infosys provides weak outlook for Q4FY14E, which could impact H1FY15E

Apr-14

Infosys guides 7-9% YoY dollar revenue growth for FY15E, below Nasscom guidance of 13-15%. Q4FY14 revenue declines 0.4%

Jun-14
Oct-14
Nov-14

Infosys appoints Dr Vishal Sikka as the successor to the current CEO, Mr Shibulal, for a period of five years. Earlier he worked with SAP for 12 years
Infosys reports a stellar Q2FY15 earnings under the leadership of Dr Sikka. It also announces a 1:1 bonus issue for equity shareholders
Infosys announces December 2 as record date for allotment of bonus shares
Infosys reports weak Q4FY15 earnings led by energy and telecom weakness. The management guided for 6.2-8.2% revenue growth in US$ terms for FY16E (10-12%

Apr-15

Infosys reports strong Q1FY16 earnings led by volumes and were above market expectations. The management maintained its 10-12% constant currency growth
guidance but raised its dollar revenue growth guidance to 7.2-9.2% for FY16E
Infosys reports strong Q2FY16 earnings led by volumes, realisaiton and were above market expectations. The management maintained its 10-12% constant currency
Oct-15
growth guidance but lowered its dollar revenue growth guidance to 6.4%-8.4% (7.2-9.2%) for FY16E
Source: Company, ICICIdirect.com Research
Jul-15

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Name
Life Insurance Corporation of India
Invest AD
GIC Private Limited
OppenheimerFunds, Inc.
BlackRock Institutional Trust Company, N.A.
HDFC Asset Management Co., Ltd.
Aberdeen Asset Management (Asia) Ltd.
Murty (Rohan)
The Vanguard Group, Inc.
ICICI Prudential Life Insurance Company Ltd.

Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
31-Dec-15 5.62
128.5
1.4
31-Dec-15 2.38
54.4
-1.8
31-Dec-15 2.25
51.4
1.5
31-Dec-15 2.17
49.6
-1.7
31-Mar-16 1.85
42.3
0.1
31-Dec-15 1.62
37.0
-0.5
29-Feb-16 1.41
32.2
-0.2
31-Dec-15 1.39
31.8
0.0
31-Dec-15 1.35
30.8
-4.0
31-Dec-15 1.30
29.8
3.1

(in %)
Promoter
FII
DII
Others

Dec-14 Mar-15
13.08
13.08
41.58
37.96
15.28
15.10
30.06
33.86

Jun-15
13.08
40.99
16.11
29.82

Sep-15 Dec-15
13.08
13.08
39.89
39.56
17.17
17.52
29.86
29.84

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Shibulal (Shreyas)
Shibulal (Shruti)
Fidelity Management & Research Company
ICICI Prudential Life Insurance Company Ltd.
Norges Bank Investment Management (NBIM)

Value
240.3m
251.7m
50.4m
51.2m
27.5m

Shares
14.7m
13.7m
3.2m
3.1m
1.6m

Sells
Investor name
Gopalakrishnan (Sudha)
William Blair Investment Management, LLC
The Vanguard Group, Inc.
Genesis Investment Management, LLP
ICICI Prudential Asset Management Co. Ltd.

Value
-996.3m
-135.5m
-66.9m
-56.6m
-36.9m

Shares
-54.2m
-8.1m
-4.0m
-3.6m
-2.3m

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

Financial summary
Profit and loss statement
(Year-end March)
Total operating Income
Growth (%)
COGS (employee expenses)

| Crore

Cash flow statement

FY15

FY16E

FY17E

FY18E

53,319

62,441

70,290

79,730

32.1

17.1

12.6

13.4

31,814

37,640

42,326

48,097

(Year-end March)
Profit after Tax
Add: Depreciation
(Inc)/dec in Current Assets

| Crore
FY15

FY16E

FY17E

FY18E

12,329

13,491

15,306

16,905

1,069

1,459

1,512

1,755

(2,004)

(2,166)

(1,864)

(2,241)

Admin expenses

3,663

4,292

4,709

5,262

Inc/(dec) in CL and Provisions

873

1,196

1,029

1,237

S&M expenses

2,941

3,431

3,796

4,305

Taxes paid

(6,751)

(5,251)

(6,161)

(6,905)
14,156

Total Operating Expenditure

38,418

45,363

50,831

57,665

CF from operating activities

10,752

10,855

12,463

EBITDA

14,901

17,078

19,459

22,065

(Inc)/dec in Investments*

1,101

3,125

3,520

3,500

29.0

14.6

13.9

13.4

(Inc)/dec in Fixed Assets

(2,247)

(2,500)

(2,500)

(2,500)

Growth (%)
Depreciation

1,069

1,459

1,512

1,755

CF from investing activities

(1,279)

625

1,020

1,000

Other Income

3,427

3,125

3,520

3,500

Dividend paid & dividend tax

(4,935)

(6,552)

(7,755)

(8,557)

17,258

18,742

21,467

23,810

4,929

5,251

6,161

6,905

12,329

13,491

15,306

16,905

30.9

9.4

13.5

10.4

PBT
Total Tax
PAT
Growth (%)
EPS (|)
Growth (%)

54

59

67

74

30.9

9.4

13.5

10.4

Others
CF from financing activities
Net Cash flow
Exchange difference

(4,935)

(6,552)

(7,755)

(8,557)

4,538

4,928

5,728

6,599

(121)

Opening Cash

25,950

30,367

35,295

41,023

Closing Cash

30,367

35,295

41,023

47,622

FY16E

FY17E

FY18E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March)
Equity Capital

| Crore

Key ratios

FY15

FY16E

FY17E

FY18E

(Year-end March)

572

1,144

1,144

1,144

Per share data (|)

FY15

Reserve and Surplus

54,191

60,558

68,109

76,457

EPS

53.9

59.0

67.0

74.0

Total Shareholders funds

54,763

61,702

69,253

77,601

Cash EPS

58.6

65.4

73.6

81.6
339.5

Employee benefit obligations

BV

239.6

269.9

303.0

Debt

DPS

29.8

24.5

29.0

32.0

160

160

160

160

132.9

154.4

179.5

208.4

46

46

46

46

54,969

61,908

69,459

77,807

EBIT Margin

25.9

25.0

25.5

25.5

PBT Margin

32.4

30.0

30.5

29.9

Property,plant and equipment

9,125

10,166

11,154

11,899

PAT Margin

23.1

21.6

21.8

21.2

Goodwill

3,091

3,091

3,091

3,091

Debtor days

66

66

66

66

638

638

638

638

Unbilled revenue

18

18

18

18

22.5

21.9

22.1

21.8

Deferred Tax Liability

Other non current liabilties
Total Liabilities
Assets

Intangibles

Cash Per Share

Operating Ratios (%)

Available for sale assets

1,345

1,345

1,345

1,345

Creditor days

Other assets

4,864

4,864

4,864

4,864

Return Ratios (%)

30,367

35,295

41,023

47,622

Cash

RoE

Investment in CD

RoCE

31.4

30.3

30.9

30.6

Trade receivables

9,713

11,375

12,805

14,524

RoIC

68.9

70.7

75.1

79.2

Unbilled revenue

2,845

3,332

3,751

4,254

101

118

133

151

Other current assets

4,170

4,170

4,170

4,170

Total Current Assets

47,196

54,290

61,881

70,721

140

164

185

209

Prepayment & O.fin.assets

Trade payables

Valuation Ratios (x)

P/E

23.0

21.0

18.5

16.8

EV / EBITDA

16.9

14.4

12.4

10.6

EV / Net Sales

4.7

3.9

3.4

2.9

Market Cap / Sales

5.3

4.5

4.0

3.6

Price to Book Value

5.2

4.6

4.1

3.6

Unearned revenue

1,052

1,232

1,387

1,573

OCL & provisions

10,188

11,180

12,033

13,059

Solvency Ratios

Total Current Liabilities

11,383

12,579

13,607

14,844

Debt/EBITDA

Net Current Assets

35,813

41,712

48,274

55,877

Debt / Equity

Application of Funds

54,969

61,908

69,459

77,807

Source: Company, ICICIdirect.com Research

Current Ratio

1.9

1.9

1.9

1.9

Quick Ratio

1.9

1.9

1.9

1.9

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

ICICIdirect.com coverage universe (IT)

Sector / Company
Cyient (INFENT)
Eclerx (ECLSER)
Firstsource (FIRSOU)
HCL Tech* (HCLTEC)
Infosys (INFTEC)
KPIT Tech (KPISYS)
Mindtree (MINCON)
NIIT Technologies (NIITEC)
Persistent (PSYS)
TCS (TCS)
Tech Mahindra (TECMAH)
Wipro (WIPRO)

CMP
(|)
484
1,349
36
853
1,239
153
731
511
771
2,520
477
589

M Cap
TP(|) Rating
(| Cr) FY15
470 Hold
5,440 31.4
1,200
Sell
5,501 74.3
42
Buy
2,408
3.3
1,000
Buy 120,348 51.4
1,400
Buy 285,452 53.9
135 Hold
3,029 11.9
1,470 Hold 12,262 63.9
525 Hold
3,126 31.8
675 Hold
6,170 36.3
2,600
Buy 496,499 110.8
600
Buy 46,136 26.7
680
Buy 145,426 35.1

EPS (|)
FY16E FY17E
32.8 39.0
105.0 115.0
3.8
4.6
55.0 63.0
59.0 67.0
12.5 14.0
73.8 89.0
45.5 50.0
38.5 47.0
122.0 130.0
30.0 37.0
36.0 40.5

P/E (x)
FY15 FY16E FY17E
15.4 14.7 12.4
18.2 12.8 11.7
10.7
9.3
7.7
16.6 15.5 13.5
23.0 21.0 18.5
12.9 12.3 11.0
11.4
9.9
8.2
16.1 11.2 10.2
21.2 20.0 16.4
22.7 20.7 19.4
17.8 15.9 12.9
16.8 16.4 14.5

EV/EBITDA (x)
FY15 FY16E FY17E
11.4
9.7
7.3
11.6
8.5
7.2
7.6
6.6
4.9
12.2 11.0
9.3
14.4 12.4 10.6
9.0
7.1
6.2
6.5
5.3
4.0
7.7
5.4
4.5
13.2 11.3
8.8
17.0 14.7 13.3
10.3
9.9
7.8
11.4 10.6
9.0

RoCE (%)
FY15 FY16E
22.2 21.3
40.4 47.6
9.5 10.8
35.2 31.4
30.3 30.9
14.7 17.4
33.7 32.5
23.4 31.7
27.5 25.4
81.8 79.0
26.9 25.5
23.0 22.1

FY17E
22.0
43.7
13.8
30.0
30.6
17.4
32.5
33.3
26.4
74.5
27.1
22.5

RoE (%)
FY15 FY16E FY17E
19.2 17.7 18.4
32.1 36.9 33.6
11.2 11.3 12.1
29.3 25.7 24.4
21.9 22.1 21.8
16.9 15.4 14.9
26.6 25.6 25.6
14.3 17.8 17.1
20.7 18.8 19.4
42.8 36.9 31.8
21.5 20.1 20.9
21.2 19.2 19.2

* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 11

ANALYST CERTIFICATION
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reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this
report.

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ICICI Securities Ltd | Retail Equity Research

Page 12