Result Update

January 15, 2016

Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Infosys (INFTEC)

Buy
| 1350
12 months
19%

Couldnt ask for more

Whats Changed?
Target
EPS FY16E
EPS FY17E
Rating

Changed from | 1,300 to | 1,350

Changed from | 57.0 to | 58.5
Changed from | 65.0 to | 67.0
Unchanged

Quarterly Performance
Revenue
EBIT
EBIT (%)
PAT

Q3FY16
15,902
3,959
24.9
3,465

Q3FY15
YoY (%)
13,796
15.3
3,689
7.3
26.7 -184 bps
3,250
6.6

Q2FY16
15,635
3,993
25.5
3,398

QoQ (%)
1.7
(0.9)
-60 bps
2.0

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

FY14
50,133
13,415
10,648
46.6

FY15
53,319
14,901
12,329
53.9

FY16E
61,737
16,654
13,378
58.5

FY17E
69,960
19,370
15,315
67.0

FY14
24.3
29.0
17.2
5.4
22.4
30.7

FY15
21.0
25.0
15.2
4.7
22.5
31.4

FY16E
19.4
23.1
13.4
4.2
21.8
30.2

FY17E
16.9
20.1
11.2
3.8
22.2
30.8

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

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (Debt-15)
Cash and Investments (Debt-15)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
258,936.6
| 0 crore
31,526.0
227,410.6
1220 / 933
| 1144 crore
|5

Price performance (%)

TCS
Infosys
Wipro
HCL Tech

| 1133

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

ICICI Securities Ltd | Retail Equity Research

Infosys reported robust Q3FY16 earnings as dollar revenue growth

and EBIT margins were ahead of our and consensus estimates
US$ revenues grew 0.6% QoQ to $2,407 million, above our 0.5%
decline and $2,380 million estimate
Infosys raised its FY16E constant currency (CC) revenue growth
guidance to 12.8%-13.2% vs. 10-12% earlier and its US$ guidance to
8.9%-9.3% (6.4-8.4%)
Reported PAT of | 3,465 crore was also above our | 3,303 crore
estimate led by revenue beat
Quarterly growth led by volumes offset by pricing
Infosys reported encouraging earnings in a seasonal soft quarter.
Sequentially dollar revenues grew 0.6% led by volumes (3.1%) partially
offset by drop in per-capita productivity. Reported growth could have
been 1.6% in dollar terms adjusted for one-time $23 million termination
fee paid by an IMS client in Q2. Volume growth was led by ramp-ups in
new accounts and new wins in existing accounts.
Visibility leads to guidance raise
Infosys raised its FY16E constant currency revenue growth guidance to
12.8%-13.2% (10-12% earlier) and its US$ revenue growth guidance to
8.9%-9.3% (6.4-8.4%) led by visibility and beat in prior quarters. Rupee
revenue guidance was also increased to 16.2%-16.6% (13.1%-15.1%) led
by higher $/| assumption (66.16 vs. 65.59 earlier). We now model 9%,
11.6% (8.5%, 12.5% earlier) dollar revenue growth in FY16E, FY17E,
respectively, led by healthy deal wins, improved win rates, better
execution and top account mining.
Margins in-line and within stated band
Q3FY16 EBIT margins declined 60 bps QoQ to 24.9%, in-line with our
24.9% estimate. Margins were impacted by 110 bps due to realisation
decline and another 60 basis points due to drop in utilization, increasing
subcontracting costs and impact of Noah consolidation. This was offset
by 110 basis points due to the benefits of both rupee depreciation and
reduction in variable fee. Infosys reiterated its target margin range of 25%
+/- 1% for FY16E and would reinvest efficiency gains into rebuilding sales
efforts and capability in newer technologies.
Standalone attrition at 15 quarter low
Consolidated annualised attrition declined 180 bps QoQ to 18.1% vs.
19.9% in Q2 while standalone annualised declined 70 bps QoQ to 13.4%
vs. 14.1% in Q2 and stands at 15 quarter low. Management highlighted
that employment engagement initiatives are resonating well with the
employees leading to moderation in attrition.
Adjusting estimates and target price
We estimate Infosys will report revenue, PAT CAGR of 14.5%, 11.5%,
(13%, 10% earlier) respectively, over FY15-17E (with average 25.2% EBIT
margins in FY16-17E), slower than 19%, 15% reported during FY10-15
along with average 27.4% margins. Over time, earnings trajectory could
improve further as strategic initiatives (such as top account mining, large
deal wins, lower attrition, improving per-capita productivity) of the new
management are bearing early fruits. We continue to value Infosys at 20x
its FY17E EPS (15% premium to its FY10-15 one-year forward PE average
of 17.4x) to arrive at our target price of | 1,350.

Variance analysis
Q3FY16 Q3FY16E
Revenue
Employee expenses

Q3FY15

YoY (%)

Q2FY16

QoQ (%)

Comments
Revenue growth was above our and consensus estimates led by robust volumes
1.7 (3.1%) in a seasonally soft quarter
2.7

15,902
9,621

15,677
9,430

13,796
8,197

15.3
17.4

15,635
9,366

Gross Margin
Gross margin (%)
Selling & marketing costs
G&A expenses
EBITDA
EBITDA Margin (%)
Depreciation
EBIT

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

6,247
39.9
862
1,113
4,272
27.3
368
3,904

5,599
40.6
770
875
3,954
28.7
265
3,689

12.2
-109 bps
11.6
25.0
9.5
-144 bps
39.2
7.3

6,269
40.1
843
1,075
4,351
27.8
358
3,993

0.2
-60 bps
1.9
1.8
-0.5
-61 bps
3.1
-0.9

EBIT Margin (%)

Other income
PBT
Tax paid
PAT

24.9
802
4,761
1,296
3,465

24.9
749
4,651
1,348
3,303

26.7
840
4,529
1,279
3,250

-184 bps
-4.5
5.1
1.3
6.6

25.5
793
4,786
1,387
3,398

EBIT margins were inline with our estimates as as headwinds from soft pricing
-60 bps and utilisation were partially offset by operational efficiencies and rupee tailwinds
1.1
-0.5
-6.6
2.0 Revenue, better other income, lower taxes beat led to profitability beat

Key Metrics
Closing employees
193,383 190,000
LTM attrition-standalone (%)
13.8
15.0
Utilisation - IT Services (%)
80.6
81.0
Average $/|
66.1
65.9
Source: Company, ICICIdirect.com Research

169,638
20.4
82.7
59.9

14.0
-663 bps
-210 bps
10.3

187,976
15.0
81.3
65.4

2.9 Net additions of 5407 QoQ

-120 bps Attrition at 15 quarter low
-70 bps Utilisation dip was led by seasonality addition of trainees
1.0

Change in estimates
(| Crore)

Revenue
EBIT

Old

60,008
15,022

FY16E
New % Change

Old

FY17E
New % Change

61,737
15,416

2.9
2.6

67,501
17,244

69,960
17,831

3.6
3.4

EBIT Margin (%)

25.0
25.0
PAT
13,022
13,378
EPS (|)
57.0
58.5
Source: Company, ICICIdirect.com Research

0 bps
2.7
2.7

25.5
14,858
65.0

25.5
15,315
67.0

0 bps
3.1
3.1

Comments
Infosys raised its FY16E $ revenue YoY growth guidance to 8.9%-9.3% (6.4-8.4%
earlier) and its constant currency growth guidance to 12.8%-13.2% vs. 10-12% earlier,
led by beat in prior quarters
Wage hikes, visa costs, currency headwinds and business investments may hurt
FY16E margins by ~90 bps

Assumptions
FY14
FY15
Closing employees
160,405 176,187
18.7
18.9
LTM attrition-standalone
Utilisation - IT Services (%
76.4
80.9
Average $/|
54.5
61.2
Source: Company, ICICIdirect.com Research

Current
FY16E
193,878
15.5
82.8
65.0

FY17E
207,765
14.5
82.7
66.0

ICICI Securities Ltd | Retail Equity Research

Earlier
FY16E
193,878
15.5
82.8
63.5

Comments
FY17E
207,765
14.5
83.0
63.5

Lower attrition could lead to higher net adds

Attrition could see a sharp drop in FY16E

Page 2

Company Analysis
Operating metric highlights
From a vertical perspective, growth was led by BFS (27.6% of revenues,
2.1% QoQ growth in dollar terms), insurance (5.9%, 6%), and energy
(5.1%, 9.2%), which continues to witness sharp rebound (grew 18.7%
QoQ in Q2). Manufacturing (22.8%, -3.6%), retail (14.7%, -0.7%), and
lifesciences (5.8%, -1.1%) were particularly weak.
Across geographies, North America (62.5% of revenue) declined 0.6%
QoQ while Europe (23.2%) grew 1.9%. India recovery continues (20.4%
on top of 12.8% QoQ growth in Q2) while Rest of the World was Ok (0.6%
vs. -0.1% in Q2).
Application development growth moderated after a good Q2 (1.3%
growth QoQ vs. 6% in Q2) while app maintenance declined 1.9% QoQ vs.
4.4% growth in Q2. Growth drivers for the quarter were consulting
(33.8% of revenues, 3.7% QoQ growth), testing services (9.2%, 2.9%),
PES (3.4%, 3.7%), and products (3%, 7.8%). IMS weakness (-13.3%) was
largely due to one-time termination fee paid by IMS client in Q2.
From a client perspective, top customer revenues declined 4.8% QoQ
(after reporting 6% QoQ growth in Q2) but grew 18.7% YoY (above
company average growth of 8.5%); top 2-5 customer revenues grew
1.6% QoQ and 11.7% YoY while 6-10 customer revenues declined 0.5%
QoQ but grew 3.8% YoY.
Demand trends across verticals
Generally manufacturing has a seasonally soft Q3. However, weakness
was accentuated by one-time client termination fee paid to Infosys in Q2.
Pipeline continues to be decent with good traction in auto. Aerospace
witnessing challenges and could be soft. Industrials with exposure to oil,
energy mining are challenged. Retail was soft in Q3 despite better holiday
season. Infosys expects volatility to continue as strong dollar is
pressurising global retailers. CPG companies continue to focus on
simplification of their technology landscape. Bright star was financial
services as company saw growth in new accounts as well as new wins in
existing accounts. Focus on digital, analytics (client behaviour, propensity
to buy products, personalised offerings), and regulatory continue to drive
spends. Energy could be soft as Infosys is seeing a second wave of price
cuts, cost reductions, postponements of projects. Telecom could be soft.
However, companies are renewing their focus on enterprise business and
are looking at newer avenues of growth (OTT services, payments,
connected devices). Though limited visibility Infosys expects CY16E
budgets could be flat to modestly negative.
Visibility leads to guidance raise
Infosys raised its FY16E constant currency revenue growth guidance to
12.8%-13.2% (10-12% earlier) and its US$ revenue growth guidance to
8.9%-9.3% (6.4-8.4%) led by visibility and beat in prior quarters. Rupee
revenue guidance was also increased to 16.2%-16.6% (13.1%-15.1%) led
by higher $/| assumption (66.16 vs. 65.59 earlier). We now model 9%,
11.6% (8.5%, 12.5% earlier) dollar revenue growth in FY16E, FY17E,
respectively, led by healthy deal wins, improved win rates, better
execution and top account mining

ICICI Securities Ltd | Retail Equity Research

Page 3

Exhibit 1: Dollar revenues may grow at 10.3% CAGR in FY15-17E vs. 13% CAGR in FY10-15
30.0

12000
25.8

10000

25.0
20.0
15.8

10.0

9498

10600
FY17E

9.0

FY16E

2407
Q3

8711
FY15

2392

2159
Q4

2256

2218
Q3

Dollar revenue

Q1

2201

8249
FY14

Q2

7398
FY13

2133

6994
FY12

5.8

5.8

3.25.6

Q1

6041

FY11

2000

7.1 6.5 5.6

3.0
4804

4000

11.6 15.0
8.7 8.5

11.5

Q2

6000

FY10

$ billion

8000

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 eight years,
FY17E could be different
35

35.0
29.0
29.0

25.8

27
20.0
16.0

19

19.0
18.7
17.0
15.8 16.5

11.6
11
3.0

3
-5
FY08

FY09

Growth, YoY

5.5

-4.9
FY10

FY11

13.0
13
10.2 11.5 13.0
9.0
9.0
9.1
8.0
7.0
5.8
5.6

FY12

Company guidance (mid-point)

FY13

FY14

FY15

FY16E

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 75 clients during the quarter taking the active client base to 1,045
compared to 950, 890 in FY15, FY14 end, respectively. Across bands, four
clients transitioned to $50-60 million bucket, three to $25-30 million, one
to $5-10 million and 10 to $1 million+. Overall, $1 million+ customers
increased by 13 to 555 vs. 542 in Q2. Revenue per FTE for consolidated
business declined 1.4% QoQ to $50,500 vs. $51,200 in Q2 and 4.2% YoY.
The managements aspirational target is to achieve revenue per FTE of
$80,000 by 2020. Quarterly revenue per customer declined to $2.30
million vs. $2.37 million in Q2 and $2.29 million, $2.27 million, $2.38,
$2.41 million in Q1FY16, Q4FY15, Q3FY15, Q2FY15, respectively. Large
deal signings continue to be healthy as it signed four deals worth $360
million in total contract value (TCV) during the quarter leading to booking
of ~$2.45 billion TCV in the last 12 months.

ICICI Securities Ltd | Retail Equity Research

Page 4

Exhibit 3: Client contribution $1 million+ increases by 13 to 555

520

526

532

529

529

535

542

555

501

FY10 FY11 FY12 FY13 FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

Q3

600
500

400

338

366

399

448

300
200
100
0

Clients contributing $1 million+

Source: Company, ICICIdirect.com Research

Margins in-line and within stated band

Q3FY16 EBIT margins declined 60 bps QoQ to 24.9%, in-line with our
24.9% estimate. Margins were impacted by 110 bps due to realisation
decline and another 60 basis points due to drop in utilization, increasing
subcontracting costs and impact of Noah consolidation. This was offset
by 110 basis points due to the benefits of both rupee depreciation and
reduction in variable fee. Infosys reiterated its target margin range of 25%
+/- 1% for FY16E and would reinvest efficiency gains into rebuilding sales
efforts and capability in newer technologies.
Exhibit 4: We expect FY16E margins could decline 90 bps YoY to 25%
35

29

29.5 29.0
25.8

26

24.0

25.1

26.1

26.7

25.7 25.9

25.5

24.9 25.0 25.5

Q3

30.4

Q2

32

24.0

23

EBIT margin

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

FY17E

FY16E

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

20

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

25
22
18.7

19
%

17.0

16

15.4

19.5

20.1 20.4

18.9 18.9
16.7

16.3

15.0

13.4

15.5
13.8

14.5

13

FY17E

FY16E

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 during FY16E

85

82.3 82.7

82

80.2

82.8 82.7
80.6

78.6

78.2

79
%

76.4

76
73

80.9

80.1

81.3

74.2
72.6
70.7

Utilisation - IT Services (ex-trainees)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

FY17E

FY16E

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

70

Outlook and valuation

Infosys reported robust Q3FY16 earnings as dollar revenue growth and
EBIT margins were ahead of our and consensus estimates. Growth was
led by BFS, insurance, verticals, Europe geography, and app dev,
consulting services while manufacturing, retial, the US and IMS were
weak. Infosys raised its FY16E constant currency revenue growth
guidance to 12.8%-13.2% (10-12% earlier) and its US$ revenue growth
guidance to 8.9%-9.3% (6.4-8.4%) led by visibility and beat in prior
quarters and suggests execution is sync with strategic vision.
We estimate Infosys will report revenue, PAT CAGR of 14.5%, 11.5%,
(13%, 10% earlier) respectively, over FY15-17E (with average 25.2% EBIT
margins in FY16-17E), slower than 19%, 15% reported during FY10-15
along with average 27.4% margins. Over time, earnings trajectory could
improve further as strategic initiatives (such as top account mining, large
deal wins, lower attrition, improving per-capita productivity) of the new
management are bearing early fruits. We continue to value Infosys at 20x
its FY17E EPS (15% premium to its FY10-15 one-year forward PE average
of 17.4x) to arrive at our target price of | 1,350.
Exhibit 7: One year forward rolling PE
1500
1200
900
600
300

Price

26

22

18

14

Jan-16

Jun-15

Nov-14

Apr-14

Sep-13

Feb-13

Jul-12

Dec-11

May-11

Oct-10

Mar-10

Aug-09

Jan-09

Jun-08

Nov-07

Apr-07

10

Source: Company, ICICIdirect.com Research

Exhibit 8: Valuation

FY14
FY15
FY16E
FY17E

Sales
(| cr)
50,133
53,319
61,737
69,960

Growth
(%)
24.2
6.4
15.8
13.3

EPS
(|)
46.6
53.9
58.5
67.0

Growth
(%)
13.0
15.8
8.5
14.5

PE
(x)
24.3
21.0
19.4
16.9

EV/EBITDA
(x)
17.2
15.2
13.4
11.2

RoNW
(%)
22.4
22.5
21.8
22.2

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

RoCE
(%)
30.7
31.4
30.2
30.8

Company snapshot
1,500

Target price : | 1350

1,200
900
600
300

Jan-17

Nov-16

Jul-16

Sep-16

Mar-16

May-16

Jan-16

Nov-15

Jul-15

Sep-15

May-15

Jan-15

Mar-15

Sep-14

Nov-14

Jul-14

Mar-14

May-14

Jan-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

Nov-11

Jul-11

Sep-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
Gopalakrishnan (Sudha)
Invest AD
OppenheimerFunds, Inc.
GIC Private Limited
HDFC Asset Management Co., Ltd.
The Vanguard Group, Inc.
Aberdeen Asset Management (Asia) Ltd.
Murty (Rohan)
ICICI Prudential Life Insurance Company Ltd.

Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Sep-15 5.56
127.1
-0.1
30-Sep-15 3.32
75.8
0.0
30-Sep-15 2.46
56.2
-0.3
30-Sep-15 2.25
51.4
-19.2
30-Sep-15 2.19
50.0
4.9
30-Sep-15 1.64
37.5
2.3
30-Sep-14 1.52
34.8
-15.6
30-Nov-15 1.49
34.0
0.0
30-Sep-15 1.39
31.8
0.0
30-Sep-15 1.17
26.7
2.3

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

15.92 13.08 13.08 13.08 13.08
42.67 41.58 37.96 40.99 39.89
14.48 15.28 15.10 16.11 17.17
26.93 30.06 33.86 29.82 29.86

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Life Insurance Corporation of India
Comgest S.A.
Dinesh (Deeksha)
Dinesh (Divya)
BlackRock Asset Management North Asia Limited
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Sells
Value
240.3m
143.9m
87.6m
41.5m
41.0m

Shares
14.7m
8.1m
4.9m
2.3m
2.3m

Investor name
OppenheimerFunds, Inc.
William Blair & Company, L.L.C.
T. Rowe Price Hong Kong Limited
Franklin Advisers, Inc.
Capital International, Inc.

Value
-339.8m
-83.1m
-61.3m
-41.6m
-13.8m

Shares
-19.2m
-4.7m
-3.5m
-2.3m
-0.8m

Page 8

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

| Crore

Cash flow statement

FY14

FY15

FY16E

FY17E

(Year-end March)

50,133

53,319

61,737

69,960

Profit after Tax

24.2

6.4

15.8

13.3

30,767

31,814

37,551

42,055

| Crore
FY14

FY15

FY16E

FY17E

10,648

12,329

13,378

15,315

Add: Depreciation

1,374

1,069

1,238

1,539

(Inc)/dec in Current Assets

(2,008)

(2,004)

(1,999)

(1,952)

Admin expenses

3,326

3,663

4,136

4,687

Inc/(dec) in CL and Provisions

2,047

873

1,103

1,078

S&M expenses

2,625

2,941

3,396

3,848

Taxes paid

(3,878)

(6,751)

(5,228)

(5,985)

Total Operating Expenditure

36,718

38,418

45,083

50,590

CF from operating activities

12,187

10,752

10,530

12,510

EBITDA

13,415

14,901

16,654

19,370

(Inc)/dec in Investments*

(1,158)

1,101

3,190

3,470

Growth (%)

16.1

11.1

11.8

16.3

(Inc)/dec in Fixed Assets

(2,745)

(2,247)

(2,500)

(2,500)

Depreciation

1,374

1,069

1,238

1,539

CF from investing activities

(5,003)

(1,279)

690

970

Other Income

2,669

3,427

3,190

3,470

Dividend paid & dividend tax

(3,143)

(4,935)

(6,685)

(7,754)

14,710

17,258

18,606

21,300

4,062

4,929

5,228

5,985

10,648

12,329

13,378

15,315

13.0

15.8

8.5

14.5

47

54

59

67

13.0

15.8

8.5

14.5

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

CF from financing activities

Others

(3,143)

(4,935)

(6,685)

(7,754)

Net Cash flow

4,041

4,538

4,536

5,725

77

(121)

Opening Cash

21,832

25,950

30,367

34,903

Closing Cash

25,950

30,367

34,903

40,628

FY15

FY16E

FY17E

Exchange difference

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March)
Equity Capital

| Crore

Key ratios

FY14

FY15

FY16E

FY17E

(Year-end March)

286

572

1,144

1,144

Per share data (|)

FY14

Reserve and Surplus

47,244

54,191

60,312

67,873

EPS

46.6

53.9

58.5

67.0

Total Shareholders funds

47,530

54,763

61,456

69,017

Cash EPS

52.6

58.6

63.9

73.7
301.9

Employee benefit obligations

BV

208.0

239.6

268.9

Debt

DPS

15.8

29.8

25.0

29.0

64

160

160

160

113.5

132.9

152.7

177.8

EBIT Margin

24.0

25.9

25.0

25.5

Deferred Tax Liability

Other non current liabilties
Total Liabilities

323

46

46

46

47,917

54,969

61,662

69,223

Assets

Cash Per Share

Operating Ratios (%)

PBT Margin

29.3

32.4

30.1

30.4

Property,plant and equipment

7,887

9,125

10,387

11,348

PAT Margin

21.2

23.1

21.7

21.9

Goodwill

2,157

3,091

3,091

3,091

342

638

638

638

Intangibles

Debtor days

61

66

66

66

Unbilled revenue

19

19

18

18

Available for sale assets

1,252

1,345

1,345

1,345

Creditor days

Other assets

2,398

4,864

4,864

4,864

Return Ratios (%)

25,950

30,367

34,903

40,628

859

Cash
Investment in CD
Trade receivables

8,351

9,713

11,246

12,744

Unbilled revenue

2,811

2,845

3,294

3,733

Prepayment & O.fin.assets

2,636

101

117

133

Other current assets

2,412

4,170

4,170

4,170

Total Current Assets

43,019

47,196

53,731

61,408

173

140

162

184

Trade payables
Unearned revenue
OCL & provisions
Total Current Liabilities

RoE

22.4

22.5

21.8

22.2

RoCE

30.7

31.4

30.2

30.8

RoIC

68.0

68.9

69.3

74.1

P/E

24.3

21.0

19.4

16.9

EV / EBITDA

11.2

Valuation Ratios (x)

17.2

15.2

13.4

EV / Net Sales

4.6

4.3

3.6

3.1

Market Cap / Sales

5.2

4.9

4.2

3.7

Price to Book Value

5.4

4.7

4.2

3.8

660

1,052

1,218

1,380

8,305

10,188

11,103

11,997

Solvency Ratios

9,138

11,383

12,486

13,564

Debt/EBITDA

Net Current Assets

33,881

35,813

41,244

47,844

Debt / Equity

Application of Funds

47,917

54,969

61,662

69,223

Current Ratio

2.0

1.9

1.9

1.9

Quick Ratio

2.0

1.9

1.9

1.9

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

ICICIdirect.com coverage universe (IT)

CMP
M Cap
Sector / Company
(|)
TP(|) Rating
(| Cr) FY15
461 500 Hold
5,183 31.4
Cyient (INFENT)
1,330 1,200
Sell
5,416 74.3
Eclerx (ECLSER)
38
45
Buy
2,577
3.3
Firstsource (FIRSOU)
820 1,050
Buy 115,620 51.4
HCL Tech* (HCLTEC)
1,146 1,350
Buy 263,184 53.9
Infosys (INFTEC)
155 135 Hold
3,051 11.9
KPIT Tech (KPISYS)
1,563 1,600 Hold 13,106 63.9
Mindtree (MINCON)
570 525 Hold
3,485 31.8
NIIT Technologies (NIITEC)
623 675 Hold
4,987 36.3
Persistent (PSYS)
2,267 2,600
Buy 446,647 110.8
TCS (TCS)
517 600
Buy 49,937 26.7
Tech Mahindra (TECMAH)
541 680
Buy 133,550 35.1
Wipro (WIPRO)
* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

EPS (|)
FY16E FY17E
34.0 40.0
105.0 115.0
4.2
5.1
55.0 64.0
58.5 67.0
12.5 14.0
75.0 96.0
42.0 47.5
41.0 48.0
122.0 130.0
29.0 36.0
37.0 40.5

P/E (x)
FY15 FY16E FY17E
14.7 13.6 11.5
17.9 12.7 11.6
11.5
9.2
7.6
16.0 14.9 12.8
21.2 19.6 17.1
13.0 12.4 11.0
24.5 20.8 16.3
17.9 13.6 12.0
17.2 15.2 13.0
20.5 18.6 17.4
19.3 17.8 14.4
15.4 14.6 13.4

EV/EBITDA (x)
FY15 FY16E FY17E
13.5 11.0
8.6
16.9 12.3 10.6
7.2
5.8
4.4
12.5 11.0
9.0
15.2 13.4 11.2
8.3
6.6
5.6
17.0 14.0 11.2
8.2
5.9
4.9
11.2
9.0
7.2
15.7 13.7 12.3
12.3 12.0
9.7
11.6 10.4
9.1

RoCE (%)
FY15 FY16E FY17E
22.2 21.9 22.4
40.4 47.6 43.7
9.5 11.6 14.1
35.2 31.7 30.5
31.4 30.2 30.8
14.7 17.4 17.4
33.7 32.9 34.3
23.4 29.8 31.9
27.5 26.6 26.6
81.8 79.0 74.5
26.9 24.9 26.5
23.0 22.6 22.4

RoE (%)
FY15 FY16E FY17E
19.2 18.1 18.6
32.1 36.9 33.6
11.2 12.2 12.9
29.3 25.7 24.7
22.5 21.8 22.2
17.0 15.4 14.9
26.6 25.9 26.9
14.3 16.6 16.6
20.7 19.7 19.5
42.8 36.9 31.8
21.5 19.4 20.4
21.2 19.7 19.1

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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Page 12