Flows net cash flow change in working capital bse 30

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Unformatted text preview: wn on new deals and (c) inferior positioning in the key growth market, Continental Europe, will result in Infosys underperforming peers for yet another year. We expect the company to deliver an earnings CAGR of 15.8% over FY14-16E and believe that at 17x FY15E, the stock is fairly valued. Hence we retain our Hold rating on the stock with a revised target price of INR3,660. We are most concerned about the trend in Infosys’ operating margins Our channel checks suggest that, while Infosys’ newfound aggression in business IT services (65% of revenues) is likely to improve deal win rates over the medium term, this could have a negative impact on the pricing of existing engagements with clients. We thus expect the operating margins of the company to decline to 23% in FY15E vs. 23.5% in FY14E. In our view, pricing reductions will more than offset the benefits from improvement in utilization and other cost-cutting measures. Research Analyst (+91) 22 7180 4037 [email protected] Price/price relative 4000 3600 3200 2800 2400 2000 1/12 7/12 1/13 7/13 Infosys Limited BSE 30 (Rebased) Performance (%) 1m 3m 12m Absolute 5.6 16.5 49.6 -0.7 4.7 5.4 BSE 30 Source: Deutsche Bank Stock data Market cap (INRm) Market cap (USDm) Shares outstanding (m) Major shareholders Free float (%) Avg daily value traded (USDm) 2,007,346 32,151 572.0 Narayan Murthy & Asso (4.5%) 81 60.6 Source: Deutsche Bank Expect Infosys to report 17% USD revenue growth in FY15E We forecast Infosys to report USD revenue growth of 15.5% yoy in FY15E (vs. 12.6% yoy in FY14E). This will be driven by blended volume growth of 15% yoy and a 1.5% yoy (constant currency) reduction in blended realized rates. Key indicators (FY1) ROE (%) Net debt/equity (%) Book value/share (INR) Reiterating Hold with a target price of INR3,660 We value Infosys at 17x FY15E P/E based on an earnings CAGR (FY13-15E) of 15.8%. See risks in the Investment Thesis below. Price/book (x) Net interest cover (x) Operating profit margin (%) 23.8 -57.0 826.80 4.3 – 23.5 Source: Deutsche Bank Forecasts And Ratios Year End Mar 31 Sales (INRm) EBITDA (INRm) Reported NPAT (INRm) Reported EPS FD(INR) DB EPS FD(INR) DB EPS growth (%) PER (x) EV/EBITDA (x) DPS (net) (INR) Yield (net) (%) 2012A 2013A 2014E 2015E 2016E 337,340.0 403,520.0 505,...
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This document was uploaded on 02/06/2014.

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