Infosys: Q4FY11 Results Quick View: Muted Results

Infosys: Q4FY11 Results Quick View: Muted Results

During Q4FY11, Infosys’ Cons. Rev. grew by 2.0% QoQ to Rs. 72,500 mn, EBITDA margins declined by 120 bps QoQ to 32.1%, PBT grew by 3.3% QoQ to Rs. 25,170 mn & PAT grew by 2.1% QoQ to Rs. 18,180 mn. Results are below our expectations, but in line with the guidance given by the management (though lower than consensus estimates). The decline in EBITDA can be attributed to lower utilization during Q4FY11 (75.2% Utilization excl. trainees in Q4 against 80.7 in Q3FY11).

Though the Dollar Revenues Growth guidance for FY12 of “18.0% to 20.0% growth” and Rupee Revenues guidance of “15.4% to 17.3% growth” is encouraging, its Rupee EPS guidance of “5.5% to 7.3% growth” is disappointing. The lower than expected Rupee EPS growth guidance has been mainly due to the expected 250 to 300 bps cut in FY12 EBIDTA margins led by (1) appreciation in the value of Rupee v/s USD (about 100 bps impact), (2) Offhore employees Salary hikes of 10 to 12% coupled with lower average utilization expected despite of aggressive hiring plan of about 45,000 employees in FY12 (about 100 to 150 bps impact) and (3) continued high investment expenses in business by way of high SG&A expenses (about 50 bps impact).

Overall, the Q4FY11 numbers are muted and certainly below expectations. The Management’s outlook for FY12 seems to be reasonable considering the Rupee/Dollar rate at 44.5, but slightly conservative given their expectation of 2012 to be a Normal growth year for IT Industry with global IT budgets are already released though they expect clients may fine-tune their budgets as macro environment still not certain. The lower than expected Q4 FY11 numbers & muted EPS growth guidance for FY12 will surely translate into lowering of estimates for FY12 & FY13. 

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