21 april 2020 results review 4qfy20 infosys

21 April 2020 Results Review 4QFY20

Infosys

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

Weathering the storm Infosys (INFY) delivered rev/margin below estimates in 4Q. While near-term

performance will be marred by demand dent across verticals, subsequent

recovery will be supported by (1) Strong growth in digital (42% of rev), (2)

Resilience in large deal wins (bookings tracking well), (3) Market-share gains

from vendor consolidation, and (4) Operational prudence & favourable onsite

supply metrics. Maintain BUY with TP of Rs 680, at 16x FY22E EPS.

INFY’s revenue stood at USD 3,197mn, -0.8/+6.4% QoQ/YoY CC and FY20

revenue growth stood at 9.8% CC (vs. 9% in FY19), tad short of its 10-10.5%

CC FY20 guidance. FY21 guidance was not provided on economic

uncertainty and COVID-19 impact in 4Q rev stood at USD 32mn or -1% QoQ

(~USD 20mn supply-related impact and ~USD 10mn demand impact). Retail

(NorthAm), Communications (Europe) and Hi-tech vertical outperformed

sequential performance, offset by QoQ decline in Mfg, Life-science, BFSI,

E&U & Communication (NorthAm).

TCV of large deal bookings in 4Q was USD 1,646mn across 12 deals and 56%

of the TCV were net-new wins. INFY’s large deal TCV in FY20 (USD 9bn)

has grown at 44% as compared to 23% growth for TCS’ total deal TCV.

INFY’s net-new wins was the highest in 3-qtr with deal closures even

towards the turbulent quarter-end.

Operating performance was lower 75bps QoQ at 21.2% EBIT% on (1)

COVID-19 related supply-demand impact (-90bps QoQ), (2) Visa expense (-

40bps), and (3) Higher G&A (CSR); offset by INR depreciation benefit

(+50bps) and Travel cost & other efficiencies (+50bps). INFY has increased its

cost optimisation focus further using a combination of delayed on-boarding,

deferral in hikes, continuity in performance-linked involuntary attrition and

other recurring cost optimisation modes (automation, offshoring, pyramid

rationalisation).

Valuation and view. Despite the near-term grind on account of COVID-19

disruption, subsequent improvement in growth trajectory is premised on (1)

Deal trends (stronger growth in TCV in FY20 as compared to TCS at 44%),

(2) Vendor consolidation gains vs. weaker incumbents (including large

global), supported by delivery efficiency and balance sheet strength (USD

3.6bn net cash), and (3) Strong digital offerings (32% YoY growth in Digital

even in a soft 4Q). Steady onsite utilisation and availability of full stack

onsite delivery centres (invested over last 3 years) will support increase in

operational rigour, mitigating the impact from operating de-leverage in

FY21. We have factored USD rev/APAT decline at 2/5% for FY21. FCF &

payout yield at 5/4% support valuations (15.4x FY22E vs. ~17x historical

avg), even as FCF generation improved in FY20 (FCF/APAT at 86% vs. 76%

in FY19).

Financial Summary

YE Mar (Rs bn) 4Q

FY20

4Q

FY19

YoY

(%)

3Q

FY20

QoQ

(%) FY18 FY19 FY20 FY21E FY22E

Net Revenues 232.67 215.39 8.0 230.92 0.8 705.22 826.76 907.91 913.88 1,020.21

EBIT 49.27 46.18 6.7 50.64 -2.7 171.48 188.79 193.74 187.09 217.00

APAT 43.15 39.80 8.4 42.72 1.0 147.34 157.73 164.04 155.71 179.85

Diluted EPS (Rs) 10.2 9.4 8.4 10.1 1.0 34.7 37.1 38.6 36.7 42.4

P/E (x)

18.8 17.6 16.9 17.8 15.4

EV / EBITDA (x)

12.9 11.8 11.4 11.7 10.1

RoE (%)

22.0 24.3 25.2 23.2 25.3

Source: Company, HSIE Research

BUY

CMP (as on 20 Apr 2020) Rs 653

Target Price Rs 680

NIFTY 9,262

KEY

CHANGES OLD NEW

Rating Buy Buy

Price Target Rs 670 Rs 680

EPS % FY20 FY21E

-1.5% 2.0%

KEY STOCK DATA

Bloomberg code INFY IN

No. of Shares (mn) 4,259

MCap (Rs bn) / ($ mn) 2,782/36,338

6m avg traded value (Rs mn) 8,001

52 Week high / low Rs 847/509

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) (15.0) (14.9) (8.9)

Relative (%) 8.8 4.5 10.3

SHAREHOLDING PATTERN (%)

Dec-19 Mar-20

Promoters 13.15 13.15

FIs & Local MFs 22.79 24.52

FPIs 33.51 31.01

Public & Others 30.55 31.32

Pledged Shares 0.00 0.00

Source : BSE

Apurva Prasad [email protected] +91-22-6171-7327 Amit Chandra [email protected] +91-22-6171-7345 Vinesh Vala [email protected] +91-22-6171-7332

Page | 2

Infosys: Results Review 4QFY20

Quarterly consolidated Financial Snapshot

Particulars (Rs bn) 4QFY20 4QFY19 YoY (%) 3QFY20 QoQ (%)

Net Revenues (USD mn) 3,197 3,060 4.5 3,243 -1.4

Net Revenues 232.67 215.39 8.0 230.92 0.8

Software development expenses 147.52 137.52 7.3 146.36 0.8

SG&A expenses 28.39 26.38 7.6 26.55 6.9

EBITDA 56.76 51.49 10.2 58.01 -2.2

Depreciation 7.49 5.31 41.1 7.37 1.6

EBIT 49.27 46.18 6.7 50.64 -2.7

Interest 0.45 - NA 0.42 NA

Other Income 6.14 6.65 -7.7 8.27 -25.8

PBT 54.96 52.83 4.0 58.49 -6.0

Minority Interest and associate profits 0.14 0.04 0.0 0.09 0.0

Tax 11.61 12.05 -3.7 13.83 -16.1

RPAT 43.21 40.74 6.1 44.57 -3.1

E/o (adj for tax) 0.06 0.94 -93.3 1.85 -96.6

APAT 43.15 39.80 8.4 42.72 1.0


Margin Analysis

Particulars (% of Revenue) 4QFY20 4QFY19 YoY (bps) 3QFY20 QoQ (bps)

Software development Expenses 63.4 63.8 -44 63.4 2

SG&A Expenses 12.2 12.2 -5 11.5 70

EBITDA Margin (%) 24.4 23.9 49 25.1 -73

EBIT Margin (%) 21.2 21.4 -26 21.9 -75

Tax Rate (%) 21.1 22.8 -168 23.6 -252

APAT Margin (%) 18.5 18.5 7 18.5 4


Revenue Growth Trajectory (% QoQ CC) Revenue Growth Trajectory (% YoY CC)

Source: Company, HSIE Research Source: Company, HSIE Research

Revenue came at USD

3,197mn, -0.8% CC QoQ

and +6.4% YoY CC;

impacted by COVID-19 by

USD 32mn (1% QoQ)

EBIT margin stood at

21.2%, -75bps QoQ and -

26bps YoY

Margins decline largely

due to COVID (-90bps),

Visa Cost (-40bps), higher

CSR (-50bps); offset by

currency tailwind (+50bps)

& lower travel cost

(+50bps)

4.4

6.9

1.1

1

.9

1.8

3

.9

(0.3

)

0.0

2.7

2.2

0.8

0

.6 2

.3

4.2

2.7

2.1

2.8

3.3

1.0

(0

.8)

(3)

1

5

9

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(% QoQ CC)

10

.9 1

4.2

12

.5 15

.1

12

.1

8.9

7.3

5.3

6.3

4.6

5.8

6.4

6.0

8.1

10

.1

11

.7

12

.4

11

.4

9.5

6.4

0

4

8

12

16

20

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(% YoY CC)

Page | 3


EBIT Margin Trajectory (%) Large Deal TCV Trend

Source: Company, HSIE Research Source: Company, HSIE Research

INFY vs. TCS vs. WPRO: Revenue Growth Trend (%

YoY CC)

INFY vs. TCS vs. WPRO: EBIT Margin Trend (%)



INFY vs. TCS vs. WPRO: BFSI Growth Trend (% YoY

CC)

INFY vs. TCS vs. WPRO: Attrition Trend (%)



25

.7

25

.9

24

.0 2

5.5

25

.5

25

.0

24

.1

24

.9

24

.6

24

.7

24

.1

24

.2

24

.7

23

.7

22

.6

21

.4

20

.5 21

.7

21

.9

21

.2

20

22

24

26

28

30

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(%)

68

8 98

3

96

2 1,2

27

80

9

1,2

07

66

4

80

6

65

7

73

1

77

9

90

5

1,1

16

2,0

29

1,5

70

1,5

68

2,7

14

2,8

47

1,8

13

1,6

46

0

500

1,000

1,500

2,000

2,500

3,000

1Q

FY

16

2Q

FY

16

3Q

FY

16

4Q

FY

16

1Q

FY

17

2Q

FY

17

3Q

FY

17

4Q

FY

17

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

(USD mn)

2.5

5.4

9.4 8.5

11.310.3

6.2 5.74.1

6.18.6

11.6

9.28.0

5.3

-1.3

14.416

17.515.9

11.2

5.9

1.0

-1.3(5)

0

5

10

15

20

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

INFY TCS WPRO(% YoY CC)

6.3 4.6 5.8

6.4 6.0

8.1

10.1

11.7

12.4 11.4

9.5

6.4 6.37.1

6.27.2

9.3

11.512.1

12.7

10.6

8.4

6.8

3.0

3.42.8 3 2.5 2.4

5.1

7.0 6.95.9

3.8 3.3 2.6

0

2

4

6

8

10

12

14

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

INFY TCS WPRO(% YoY CC)

24.1

24.2 24.3 24.723.7 23.7

22.6 21.4 20.5 21.7 21.921.2

23.4

25.1 25.2 25.4 25.026.5

25.6 25.124.2 24.0

25.0 25.1

16.8 17.3

14.9 14.6

17.5

15.0

19.819.2

18.5 18.1 18.417.6

12

14

16

18

20

22

24

26

28 1

QF

Y1

8

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

INFY TCS WPRO(%)

16.9 17.215.8

16.6

20.619.9

17.8 18.3

21.5

19.4

17.6 18.2

11.6 11.3 11.1 11.0 10.9 10.9 11.2 11.3 11.5 11.6 12.2 12.1

16.1 16 16.116.8 17.1 17.5 17.9 17.6 17.6 17.0

15.714.7

5

7

9

11

13

15

17

19

21

23

1Q

FY

18

2Q

FY

18

3Q

FY

18

4Q

FY

18

1Q

FY

19

2Q

FY

19

3Q

FY

19

4Q

FY

19

1Q

FY

20

2Q

FY

20

3Q

FY

20

4Q

FY

20

INFY TCS WPRO(% )

Page | 4


Vertical Revenue Break-up

(% of revenue) 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20

Financial

services 32.5 31.8 32.2 32.5 31.6 31.4 31.9 31.5 31.5

Retail 15.9 16.6 16.8 16.4 15.9 15.8 15.2 15.3 15.5

Communication 12.9 12.7 12.3 11.9 13.5 13.8 13.1 13.0 13.0

Energy,

Utilities,

Resources &

Services

12.0 12.4 12.3 12.8 12.7 13.0 13.1 12.8 12.9

Manufacturing 9.6 9.6 9.6 10.1 10.0 9.6 10.1 10.3 10.1

Hi Tech 7.4 7.4 7.5 7.3 7.7 7.7 7.6 7.6 7.9

Life Sciences 6.7 6.6 6.4 6.2 6.0 6.1 6.4 6.7 6.4

Others 2.9 2.9 2.9 2.8 2.6 2.6 2.6 2.8 2.3

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0


Vertical-wise Revenue Growth

(QoQ, %) 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20

Financial

services 1.0 (1.5) 4.6 3.2 (0.4) 1.7 4.2 (0.2) (2.0)

Retail (0.1) 5.0 4.6 (0.2) (0.7) 1.7 (1.4) 1.7 (0.1)

Communication 5.6 (0.6) (0.1) (1.1) 16.2 4.6 (2.7) 0.3 (1.4)

Energy,

Utilities,

Resources &

Services

1.9 4.3 2.6 6.1 1.6 4.7 3.3 (1.3) (0.6)

Manufacturing 2.2 1.0 3.2 7.6 1.4 (1.8) 7.9 3.0 (3.3)

Hi Tech 4.6 1.6 4.1 (0.5) 8.1 2.3 1.2 1.0 2.5

Life Sciences 4.1 (0.9) 0.3 (0.9) (0.9) 4.0 7.6 5.8 (5.8)

Others (7.1) 1.3 1.9 (1.3) (4.9) 2.3 2.5 8.8 2.1

Total 1.8 0.9 3.2 2.2 2.4 2.3 2.5 1.0 (1.4)


Retail, Travel & Hosp and

E&U verticals expected to

have higher negative impact

in the near term

12 large deal wins in 4Q

included 4 from Retail &

CPG, 3 wins from E&U and

1 each in BFSI, Mfg,

Communication and Hi-tech

BFS clients expected to be

impacted by lower interest

rates, deferred loan

payments, lower cards and

payments business

Retail to witness pressure

on spends due to lockdown;

while pipeline is strong

conversion is a challenge

Media segment clients to

remain under pressure due to

lesser events and lower

advertising

In telecom, 5G spend can be

deferred with delay in B2B

use-cases

INFY has appointed Uri

Levine (tech entrepreneur) as

Independent Director

following step-down of DN

Prahlad as Director

(Director since 2016)

Page | 5


Services Break-up


Digital Services 26.8 28.4 31 31.5 33.8 35.7 38.3 40.6 41.9

Core/ Legacy Services 73.2 71.6 69 68.5 66.2 64.3 61.7 59.4 58.1

Total Revenue 100 100 100 100 100 100 100 100 100

Services 95.1 95.2 94.9 94.5 94.6 94.3 93.6 94 93.8

Product & Platform 4.9 4.8 5.1 5.5 5.4 5.7 6.4 6 6.2

Total Revenue 100 100 100 100 100 100 100 100 100


Services Growth


Digital Services 4.5 7.0 12.6 3.9 9.9 8.1 10.0 7.1 1.7

Core/ Legacy Services 0.9 (1.3) (0.6) 1.5 (1.0) (0.6) (1.6) (2.7) (3.6)

Total Revenue 1.8 0.9 3.2 2.3 2.4 2.3 2.5 1.0 (1.4)

Services 2.4 1.0 2.9 1.8 2.6 2.0 1.8 1.5 (1.6)

Product & Platform (7.6) (1.1) 9.6 10.3 0.6 8.0 15.1 (5.3) 1.9

Total Revenue 1.8 0.9 3.2 2.3 2.4 2.3 2.5 1.0 (1.4)


Geographic Revenue Break-up


North America 59.4 60.0 60.3 60.4 61.2 61.6 61.4 61.3 61.6

Europe 24.8 24.3 24.0 24.2 24.0 23.6 24.1 24.4 24.4

India 2.8 2.6 2.5 2.6 2.3 2.3 2.7 2.8 2.6

Rest of the World 13.0 13.1 13.2 12.8 12.5 12.5 11.8 11.5 11.4

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0


Geographic Revenue Growth


North America 0.1 1.9 3.7 2.4 3.8 3.0 2.2 0.9 (0.9)

Europe 3.5 (1.1) 1.9 3.1 1.6 0.6 4.7 2.3 (1.4)

India (5.0) (6.3) (0.8) 6.3 (9.4) 2.3 20.4 4.8 (8.5)

Rest of the World 8.5 1.7 4.0 (0.8) 0.0 2.3 (3.2) (1.5) (2.3)

Total 1.8 0.9 3.2 2.3 2.4 2.3 2.5 1.0 (1.4)


Headcount, Attrition and Utilisation Data

(Nos.) 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20

Total headcount 204,107 209,905 217,739 225,501 228,123 229,029 236,486 243,454 242,371

Net Additions 2,416 5,798 7,834 7,762 2,622 906 7,457 6,968 (1,083)

Quarterly

Annualised

Attrition (%)

16.6 20.6 19.9 17.8 18.3 21.5 19.4 17.6 18.2

Utilisation

Including

Trainees (%)

80.8 81.5 80.2 79.8 78.9 80.3 81.6 80.4 79.0

Utilisation

Excluding

Trainees (%)

84.7 85.7 85.6 83.8 82.3 83.1 84.9 84.4 83.5


Digital grew to 41.9% of

revenue and at a robust

31.7% YoY CC, although

QoQ growth moderated

Cloud transformation

and virtual workforce is

a large opportunity

within digital

Within geographies, 7

large deal wins were

from Americas and 5

from Europe region

Attrition increased by

60bps QoQ at 18.2%;

utilisation dipped 90bps

to 83.5%

INFY currently has 93%

of its workforce

working remotely or

WFH

Receivables including

unbilled revenue

increased to 103 days

from 89 days in FY19

(101 days in 3Q) with

increase in both

receivable days and

unbilled

Page | 6


Key Assumptions

Particulars FY16 FY17 FY18 FY19 FY20 FY21E FY22E

USD Revenue Growth (%) 9.1 7.4 7.2 7.9 8.3 (2.0) 10.1

USD/INR Rate 65.69 67.09 64.47 70.07 71.07 73.00 74.00

EBIT Margin (%) 25.0 24.7 24.3 22.8 21.3 20.5 21.3


Change in Estimates

(Rs bn)

FY21E FY22E

Earlier New % Change Earlier New % Change

Revenue (USD Mn) 12,809 12,519 -2.3 14,000 13,787 -1.5

Revenue 935.06 913.88 -2.3 1,036.01 1,020.21 -1.5

EBIT 192.1 187.09 -2.6 217.23 217 -0.1

EBIT Margin (%) 20.5 20.5 (7)bps 21.0 21.3 30bps

EPS (Rs) 37.2 36.7 -1.5 41.5 42.4 2.0

Source: HSIE Research

Peer Set Comparison

Company MCap CMP TP

RECO EPS (Rs) P/E (x) RoE (%)

(Rs bn) (Rs) (Rs) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E

TCS 6,824 1,819 1,680 REDUCE 83.9 86.2 78.9 88.3 21.7 21.1 23.1 20.6 36.1 37.3 35.1 38.9

Infosys 2,773 653 680 BUY 37.1 38.6 36.7 42.4 17.5 16.9 17.8 15.4 24.3 25.2 23.2 25.3

HCL Tech 1,275 470 525 BUY 37.3 39.5 37.5 43.9 12.6 11.9 12.5 10.7 26.0 23.5 19.1 19.4

Wipro 1,030 181 185 REDUCE 15.8 17.0 15.6 17.0 11.4 10.6 11.5 10.6 17.3 17.3 14.9 14.2

TechM 506 524 660 BUY 48.9 48.3 45.0 50.9 10.7 10.8 11.6 10.3 22.0 20.6 17.7 17.8

Tier-1 IT

Median 12.6 11.9 12.5 10.7 24.3 23.5 19.1 19.4

LTI 260 1,495 1,650 ADD 87.1 86.2 93.1 109.9 17.2 17.3 16.1 13.6 34.6 28.2 26.3 27.0

Mphasis 140 749 800 ADD 57.6 60.4 59.6 66.9 13.0 12.4 12.6 11.2 20.0 20.5 18.6 19.3

L&T Tech 132 1,266 1,215 ADD 67.8 77.2 72.9 86.7 18.7 16.4 17.4 14.6 32.0 29.8 24.4 25.2

Mindtree 130 787 815 ADD 44.1 40.2 43.4 54.2 17.9 19.6 18.1 14.5 24.9 19.0 20.6 23.0

Hexaware * 82 276 295 ADD 19.6 21.5 20.0 22.6 14.1 12.8 13.8 12.2 26.5 24.6 20.1 20.5

Tata Elxsi 45 730 NA NR 46.6 41.2 40.2 45.1 15.7 17.7 18.1 16.2 34.5 25.2 21.4 20.9

Persistent 38 491 535 REDUCE 47.8 45.7 36.2 44.5 10.3 10.7 13.6 11.0 15.7 14.0 11.3 12.9

Cyient 26 236 280 ADD 43.6 34.7 27.8 31.1 5.4 6.8 8.5 7.6 19.5 14.7 11.0 11.5

Zensar 22 96 95 ADD 14.2 10.3 9.2 11.8 6.7 9.2 10.4 8.1 17.6 11.5 9.4 11.2

Sonata 20 196 250 BUY 23.7 27.3 22.4 27.5 8.3 7.2 8.8 7.1 35.1 34.6 25.6 28.6

Intellect 12 88 NA NR 7.7 -1.7 -1.8 3.0 11.5 NM -50.5 29.7 11.1 -2.2 -2.3 3.9

Majesco 8 285 360 BUY 18.3 18.0 20.5 24.8 15.5 15.8 13.9 11.5 8.4 7.3 7.8 8.8

Mastek 7 250 333 BUY 39.9 39.8 39.6 43.2 6.3 6.3 6.3 5.8 15.9 15.0 13.3 12.8

Tier-2 IT AVG

12.3 12.7 8.2 12.5 22.8 18.6 15.9 17.4

Tier-2 IT

Median 13.0 12.6 13.6 11.5 20.0 19.0 18.6 19.3

Source: HSIE Research, *Dec YE

Page | 7


Financials Consolidated Income Statement YE March (Rs bn) FY17 FY18 FY19 FY20 FY21E FY22E

Net Revenues (US $mn) 10,208 10,939 11,799 12,774 12,519 13,787

Growth (%) 7.4 7.2 7.9 8.3 -2.0 10.1

Net Revenues 684.85 705.22 826.76 907.91 913.88 1,020.21

Growth (%) 9.7 3.0 17.2 9.8 0.7 11.6

Software development expense 415.5 432.69 518.58 578.38 595.37 655.77

SG&A expense 83.3 82.43 99.29 106.85 102.7 116.36

EBITDA 186.05 190.1 208.89 222.68 215.81 248.08

Depreciation 17.03 18.62 20.1 28.94 28.72 31.08

EBIT 169.02 171.48 188.79 193.74 187.09 217

EBIT (%) 24.7 24.3 22.8 21.3 20.5 21.3

EBIT Growth (%) 8.2 1.5 10.1 2.6 -3.4 16

Other Income 30.49 33.11 21.61 28.03 25.88 26.96

Interest - - - 1.69 1.8 1.8

PBT 199.51 204.59 210.4 220.08 211.17 242.16

Tax (incl deferred) 55.98 42.42 56.31 53.68 54.9 61.75

RPAT 143.53 162.17 154.03 165.95 155.71 179.85

E/o (adj for tax) - 14.83 -3.7 1.91 - 0

APAT 143.53 147.34 157.73 164.04 155.71 179.85

APAT Growth (%) 6.4 2.7 7.0 4.0 -5.1 15.5

EPS 33.8 34.7 37.1 38.6 36.7 42.4

EPS Growth (%) 6.4 2.7 7.0 4.0 -5.1 15.5


Consolidated Balance Sheet

YE March (Rs bn) FY17 FY18 FY19 FY20 FY21E FY22E

SOURCES OF FUNDS

Share Capital – Equity 11.44 10.88 21.7 21.22 21.22 21.22

Reserves 678.38 638.35 627.78 633.28 665.85 712.72

Total Shareholders' Funds 689.82 649.23 649.48 654.50 687.07 733.94

Minority Interest - 0.01 0.58 3.94 3.94 3.94

Lease liability - - - 46.33 46.33 46.33

Net Deferred Taxes -3.33 -7.41 -7.00 -7.76 -7.76 -7.76

Long Term Provisions & Others 1.53 6.44 4.22 10.86 11.95 11.95

TOTAL SOURCES OF FUNDS 688.02 648.27 647.28 707.87 741.53 788.40

APPLICATION OF FUNDS

Net Block 97.51 101.16 114.79 166.03 173.74 184.02

CWIP 13.65 16.06 13.88 9.54 9.54 9.54

Goodwill & Other Intangible Assets 44.28 24.58 42.31 71.86 70.64 72.71

Other Non-current Assets 73.85 88.94 89.97 76.37 76.37 76.46

Total Non Current Assets 232.04 232.9 262.34 325.45 331.95 344.38

Cash & Equivalents 387.73 317.65 306.9 272.76 290.54 309.39

Debtors 123.22 131.42 148.27 184.87 186.09 207.74

Other Current Assets 85.16 104.11 116.15 127.16 136.56 152.45

Total Current Assets 208.38 235.53 264.42 312.03 322.65 360.19

Creditors 3.67 6.94 16.55 28.52 28.71 32.05

Other Current Liabilities & Provns 136.46 130.87 169.83 173.85 174.9 193.51

Total Current Liabilities 140.13 137.81 186.38 202.37 203.6 225.56

Net Current Assets 68.25 97.72 78.04 109.66 119.05 134.63

TOTAL APPLICATION OF FUNDS 688.02 648.27 647.28 707.87 741.53 788.40


Page | 8


Consolidated Cash Flow

YE March (Rs bn) FY17 FY18 FY19 FY20 FY21E FY22E

Reported PBT 199.51 204.59 210.40 220.08 211.17 242.16

Non-operating & EO items -23.14 -21.70 -13.77 1.45 -19.15 -20.09

Interest expenses - - - 1.69 1.80 1.80

Depreciation 17.03 18.62 20.10 28.94 28.72 31.08

Working Capital Change -21.56 0.84 -4.53 -19.38 -9.39 -15.58

Tax paid -56.53 -68.29 -68.32 -45.50 -54.90 -61.75

OPERATING CASH FLOW ( a ) 115.31 134.06 143.88 187.28 158.24 177.62

Capex -27.60 -19.98 -24.45 -46.14 -36.43 -41.36

Free cash flow (FCF) 87.71 114.08 119.43 141.14 121.82 136.26

Investments - 0.59 0.77 -0.26 - -

Non-operating income 23.14 21.70 13.77 -1.45 19.15 20.09

INVESTING CASH FLOW ( b ) -4.46 2.31 -9.91 -47.85 -17.27 -21.27

FCFE 87.71 114.08 119.43 139.45 120.02 134.46

Share capital Issuance - 0.05 0.06 0.06 - -

Dividend/Buyback -69.39 -205.10 -145.18 -170.26 -123.13 -132.98

FINANCING CASH FLOW ( c ) -69.39 -205.05 -145.12 -171.89 -124.93 -134.78

NET CASH FLOW (a+b+c) 41.46 -68.68 -11.15 -32.46 16.04 21.56

Closing Cash & Equivalents 387.73 317.65 306.90 272.76 290.54 309.39


Key Ratios

FY17 FY18 FY19 FY20 FY21E FY22E

PROFITABILITY (%)

EBIT Margin 24.7 24.3 22.8 21.3 20.5 21.3

APAT Margin 21.0 23.0 18.6 18.3 17.1 17.7

RoE 22.0 22.0 24.3 25.2 23.2 25.3

RoIC or Core RoCE 22.8 43.1 41.2 37.8 31.2 34.8

RoCE 22.0 22.1 24.3 24.2 21.5 23.5

EFFICIENCY

Tax Rate (%) 28.1 20.7 26.8 24.4 26 25.5

Fixed Asset Turnover (x) 3.5 3.4 3.4 3.2 3.1 3.2

Debtors (days) 66 68 65 74 74 74

Other Current assets (days) 45 54 51 51 55 55

Payables (days) 2 4 7 11 11 11

Other Current liabilities (days) 73 68 75 70 70 69

Cash Conversion Cycle (days) 36 51 34 44 48 48

Net Debt/EBITDA (x) -0.7 -0.7 -0.7 -0.6 -0.6 -0.7

Net Debt/Equity (x) -0.2 -0.2 -0.2 -0.2 -0.2 -0.2

Interest Coverage (x) N.A. N.A. N.A. 115 104 121

PER SHARE DATA

EPS (Rs/sh) 33.8 34.7 37.1 38.6 36.7 42.4

CEPS (Rs/sh) 36.9 38.1 40.9 44.3 42.4 48.5

DPS (Rs/sh) 12.9 16.8 21.5 17.5 25.0 27.0

BV (Rs/sh) 158.5 149.1 149.2 150.4 157.8 168.6

VALUATION

P/E 19.3 18.8 17.6 16.9 17.8 15.4

P/BV 4.1 4.4 4.4 4.3 4.1 3.9

EV/EBITDA 12.8 12.9 11.8 11.4 11.7 10.1

OCF/EV (%) 4.8 5.5 5.8 7.4 6.3 7.1

FCF/EV (%) 3.7 4.6 4.8 5.5 4.8 5.4

FCFE/mkt cap (%) 3.2 4.1 4.3 5.0 4.3 4.8

Dividend Yield (%) 2.0 2.6 3.3 2.7 3.8 4.1


Page | 9


Rating Criteria

BUY: >+15% return potential

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

SELL: > 10% Downside return potential

Date CMP Reco Target

1-Apr-19 742 BUY 805

9-Apr-19 767 BUY 805

13-Apr-19 748 NEU 755

5-Jul-19 718 NEU 775

13-Jul-19 727 NEU 770

27-Aug-19 803 NEU 770

22-Sep-19 805 NEU 800

4-Oct-19 786 NEU 835

12-Oct-19 816 NEU 835

18-Nov-19 704 BUY 840

30-Dec-19 737 BUY 840

7-Jan-20 739 BUY 850

11-Jan-20 738 BUY 850

2-Mar-20 732 ADD 865

18-Mar-20 555 BUY 735

6-Apr-20 586 BUY 670

21-Apr-20 653 BUY 680

From 2nd March 2020, we have moved to new rating system

RECOMMENDATION HISTORY

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850

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Ap

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9

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Infosys TP

Page | 10


HDFC securities

Institutional Equities

Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park,

Senapati Bapat Marg, Lower Parel, Mumbai - 400 013

Board: +91-22-6171-7330 www.hdfcsec.com

Disclosure: We, Apurva Prasad, MBA, Amit Chandra, MBA & Vinesh Vala, MBA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. 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. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. 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