infosys (info in)
TRANSCRIPT
January 14, 2021 1
Rating: BUY | CMP: Rs1,387 | TP: Rs1,611
Doubling down on deal wins
Quick Pointers:
Infy continued its phenomenal revenue growth performance delivering +5.3%
QoQ CC & +6.2% QoQ USD growth, highest 3rd quarter growth in 8 years
Large deal TCV was at all-time high of $7.13bn with 73% being net new. TCV
includes Daimler deal which is expected to be the largest ever IT services deal
signed in India.
Infy reported phenomenal revenue growth of +5.3% QoQ CC, beating our
expectations by 2.4%. Growth beat was driven by revenue gains by strong
deal TCV of 1HFY21 and earlier quarters. Digital revenues grew by 31.3% YoY
CC and contributing to 50.1% to total revenues (vs 47.3% in 2Q21 and 44.5%
in 1Q21). Revenue growth was broad based led by 9.8% QoQ USD rise in BFSI
(led by ramp up of Vanguard deal) 10.8% QoQ USD rise in Life Sciences and
8.5% QoQ rise in Manufacturing. Infy posted a strong margin of 25.4% (Ple:
24.9%, Cons:25.1%). Improving onsite pyramid, offshore and nearshore mix,
utilization and automation are strong strategic levers for margin expansion.
Infy reported large deal TCV at all-time high of USD7.13bn (vs USD3.145bn
last quarter) with 73% being net new. Infosys is strongly positioned with nine
months’ deal TCV at USD12bn with USD8Bn net new deals. Infy’s strength in
Cobalt solution to implement flexible, scalable and secure hybrid cloud model
helped them win this highly competitive Daimler deal.
Infy’s ability to win large deals in highly competitive environment showcases
their strong digital capabilities we expect it to further gain market share in
coming quarters. Management stated that budget planning for CY21 by
clients is progressing normally with positive growth estimates. Deal pipeline
remains healthy with broad-based improvement. Infosys stays our top pick in
the sector as it benefits from near term margin defense and long term growth
acceleration from DX/cloud/AI megatrends. We are assigning 27X multiple
(11% discount to TCS multiple) to Infy as we believe higher multiple is
justified due to following factors 1) Strong revenue acceleration 2) Best in
class metrics along with broad based recovery 3) Excellent supply chain
mechanism 4) Strong dividend payouts 5) All time high deal wins. We have
increased our EPS estimates by 4.7% each in FY22/23E. We value Infy at 27x
to arrive at a changed target price of INR 1611 (earlier: INR1538) on FY23 EPS
of Rs. 59.7. Infy is currently trading at 25.5X/23.2X FY22/23 earnings of INR
54.5/59.7 on FY22/23E respectively. Reiterate BUY.
Phenomenal growth in seasonally weak quarter: Revenue growth
acceleration continued for Infy reporting USD 3516mn revenues up +5.3%
QoQ CC vs Ple 3.2%/Cons 3% QoQ CC. Strong growth was on back of strong
deal momentum in H1FY21 and earlier deals. Digital revenues grew by
31.3% YoY CC and contributing to 50.1% to total revenues (vs 47.3% in
2Q21 and 44.5% in 1Q21). Revenue growth was broad based led by 9.8%
QoQ USD rise in BFSI, 10.8% QoQ USD rise in Life Sciences and 8.5% QoQ
rise in Manufacturing. Retail grew at 4.7% QoQ USD despite seasonal softness
and revival in telecom led to 4.5% growth in Communications & Media vertical.
Infosys (INFO IN)
January 14, 2021
Q3FY21 Result Update
☑ Change in Estimates | ☑ Target | Reco
Change in Estimates
Current Previous
FY22E FY23E FY22E FY23E
Rating BUY BUY
Target Price 1,611 1,538
Sales (Rs. m) 11,71,898 13,13,437 11,47,712 12,83,152
% Chng. 2.1 2.4
EBITDA (Rs. m) 3,13,763 3,34,788 2,92,808 3,14,237
% Chng. 7.2 6.5
EPS (Rs.) 54.5 59.7 52.0 57.0
% Chng. 4.7 4.8
Key Financials - Standalone
Y/e Mar FY20 FY21E FY22E FY23E
Sales (Rs. bn) 908 1,006 1,172 1,313
EBITDA (Rs. bn) 223 276 314 335
Margin (%) 24.5 27.5 26.8 25.5
PAT (Rs. bn) 166 192 231 253
EPS (Rs.) 39.1 45.3 54.5 59.7
Gr. (%) 10.3 16.0 20.2 9.5
DPS (Rs.) 20.9 33.6 21.6 24.0
Yield (%) 1.5 2.4 1.6 1.7
RoE (%) 25.4 27.3 28.2 27.9
RoCE (%) 29.6 34.7 34.4 33.7
EV/Sales (x) 6.2 5.6 4.7 4.1
EV/EBITDA (x) 25.5 20.2 17.4 16.2
PE (x) 35.5 30.6 25.5 23.2
P/BV (x) 9.0 7.9 6.6 6.4
Key Data INFY.BO | INFO IN
52-W High / Low Rs.1,393 / Rs.509
Sensex / Nifty 49,492 / 14,565
Market Cap Rs.5,911bn/ $ 80,807m
Shares Outstanding 4,260m
3M Avg. Daily Value Rs.25915.78m
Shareholding Pattern (%)
Promoter’s 13.33
Foreign 32.26
Domestic Institution 23.75
Public & Others 30.66
Promoter Pledge (Rs bn) -
Stock Performance (%)
1M 6M 12M
Absolute 19.3 74.1 79.4
Relative 11.1 29.1 51.7
Aniket Pande
[email protected] | 91-22-66322300
Aditi Patil
Infosys
January 14, 2021 2
Exceptionally high large deal wins: Infosys reported large deal TCV at all
time high of USD7.13bn (vs USD3.145bn last quarter) with 73% being net new.
Infosys is strongly positioned with nine months’ deal TCV at USD12bn with
USD8Bn net new deals. This includes Daimler deal which is expected to be the
largest ever IT services deal signed in India and another deal of size 500mn.
Infy’s strength in Cobalt solution to implement flexible, scalable and
secure hybrid cloud model helped them win this highly competitive
Daimler deal. Revenue from Daimler deal is expected to ramp up in
2QFY22 and revenue from other large deals will start flowing in next 2
quarters.
Infy won total of 22 deals in 3Q with 8 deals in BSFI, 4 each in manufacturing
& E&U, 3 in communication, and 1 each in Hi-tech, Retail, and others. 13 deals
won in US, 7 in Europe and 2 in RoW. Deal pipeline remains strong with clients
focusing on accelerated digital transformation, cloud deployment, SaaS and
automation projects to improve cost efficiencies.
Broad-based deal pipeline: Deal pipeline remains healthy in retail with strong
demand for vendor consolidation and captive operations deals. Mortgages,
Wealth management, cloud, data services & Finacle will continue to drive
demand for BFSI. BSFI reported strongest QoQ growth of any Q3 in many
years. Vanguard contributed a lot of the incremental growth in the quarter. Also,
ramps up of other deals from wealth, mortgage and retail banking also
contributed to growth. Capital markets and card sub-segments are still soft.
BSFI spending is stronger in US banks vs European banks. They expect
Europe BSFI to also come back strongly. They are witnessing strong demand
for digital banking products. Demand for cloud and digital is strong.
Management stated that pipeline is strong in telecom space but softness in
media and entertainment space continues. In E&U space, Utilities have shown
robust growth while oil & gas remains soft. TCS continues to expand its strong
presence in continental Europe with 4.8% QoQ USD growth
Revenue guidance indicates soft performance in seasonally weak 4Q:
FY21E revenue growth guidance increases to 4.5%-5.0% in constant currency
improvement from 1.5-2.5% guidance stated in 2Q21. Guidance implies 0-2%
sequential growth for 4QFY21. This guidance is line with seasonally weak
4Q for Infy with -1.4% / +2.4%/ +1.8% / +0.7% / +1.6% QoQ USD growth in
4Q20 / 4Q19 / 4Q18 / 4Q17 / 4Q16 resp. Infy increased operating margin
guidance for FY21E to 24-25% (versus 23-24% earlier). Management stated
that budget planning for CY21 by clients is progressing normally with
positive growth estimates.
Strong Operational Performance: Infy’s maintained margins at same level
as last quarter 25.4% (Ple: 24.9%, Cons:25.1%). Tailwinds were i) +100 bps
increase due to higher utilization, offshoring and operational efficiency, ii)
20bps because of cross currency gains offset by headwind i) -50 bps impact of
large new deal transitioning & employee rebadging expenses and ii) -50 bps
impact of higher sub-contractor and other costs. Infy will implement salary hike
from Jan 1.
Infy’s strength in Cobalt solution to
implement flexible, scalable and
secure hybrid cloud model helped
them win this highly competitive
Daimler deal. Revenue from Daimler
deal is expected to ramp up in
2QFY22 and revenue from other
large deals will start flowing in next 2
quarters.
Strategic levers like improvement in
offs Management stated that budget
planning for CY21 by clients is
progressing normally with positive
growth estimates.
Strategic levers like improvement in
offshore-onsite mix and nearshore
models, onsite pyramid reshaping
(hiring more freshers), and
automation – to improve productivity
will have continued long lasting
impact on margins.
Infosys
January 14, 2021 3
Managmement mentioned they expect utilization at 83-84% levels, with
some of the travel restriction coming off, the onsite mix will improve from
current levels. These will be off-set by improvement in other productivity levers.
Variable pay in Q3 was 100%. Salary hike will be given from January 01, 2021.
Promotion cycle has also re-started. Salary hike for FY22 will be decided later.
Some amount of WFH will stay for ever and this will be margin accretive.
LTM attrition has reduced to 10%. Attrition will inch up over the next few
quarters. Management is comfortable with 13-15% attrition range.
Improvement in onsite pyramid, offshoring and near shoring to drive
margins: Over the years Infy has taken consistent efforts in localization
resulting in continuous improvement in onsite employee pyramid which has
turned out to be a major margin lever. Infy has posted high offshore mix of
74.8% vs 73.9% in 2QFY21.
Infy is also developing near shore centers in Canada and Mexico to further
adding to margin levers. Utilization was at record high of 86.3% and
management stated that it will come down to normal range of 83-85% with
aggressive hiring in couple of quarters. Net headcount addition was robust at
9104 employees this quarter. In FY22, they are planning to hire ~22,000
employees.
Robust cash flows: FCF for Q3 was a healthy $772 million, which is a growth
of 15.1% Y-o-Y driven by lower capex as 97% of work force was working from
home in 3Q. FCF/NI was 109%. DSO increased by 4 days QoQ and stood at
73 days. Board declared interim dividend of INR12, on top of INR 12 dividend
declared in 2Q.
Q3FY21 Result Overview (Rs mn)
Y/e March 3Q21 2Q21 QoQ 3Q20 YoY Variance (Ple VS
ACTUAL)
Net sales (US$ m) 3,516 3,312 6.2% 3,243 8.4% 2.4%
Net sales 2,59,270 2,45,700 5.5% 2,30,920 12.3% 2.3%
EBITDA 74,150 70,830 4.7% 58,000 27.8% 4.1%
EBITDA Margin 28.6% 28.8% -23 bps 25.1% 348 bps 50 bps
EBIT 65,890 62,280 5.8% 50,640 30.1% 4.3%
EBIT Margin 25.4% 25.3% 7 bps 21.9% 348 bps 49 bps
Adj. Net Profit 51,970 48,450 7.3% 44,570 16.6% 1.6%
Adjusted EPS 12.2 11.4 7.2% 10.5 16.5% 1.6%
Source: Company, PL
Infy won total of 22 deals in 3Q with 8
deals in BSFI, 4 each in
manufacturing & E&U, 3 in
communication, and 1 each in Hi-
tech, Retail, and others. 13 deals won
in US, 7 in Europe and 2 in RoW.
Infosys
January 14, 2021 4
Strong Revenue growth in seasonally weak 3Q
2.7%2.2%
0.8%
2.3%
4.2%
2.1%
3.3%
-0.8%
-2.0%
4.0%
5.3%
6.3%
4.6%
6.4%
8.1%
10.1%11.4%
6.4%
1.5%2.2%
6.6%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
3Q
20
4Q
20
1Q
21
2Q
21
3Q
21
CC revenue growth QoQ CC revenue growth YoY
Source: Company, PL
TCV deal wins almost doubled for two consecutive quarters
1,2
07
664
806
657
731
779
905
1,1
16 2,0
29
1,5
70
1,5
71 2
,714
2,8
47
1,8
13
1,6
46
1,7
44 3,1
50
7,1
29
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
3Q
20
4Q
20
1Q
21
2Q
21
3Q
21
US
D M
n
TCV Deal Pipeline
Source: Company, PL
Net New deal wins improved
234
290
525
1,2
17
471
1,0
84
679
285
598
922
331
2,7
05
5,2
04
30 32
47
60
30
69
25
10
33
56
19
86
73
0
10
20
30
40
50
60
70
80
90
100
0
1,000
2,000
3,000
4,000
5,000
6,000
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
Net new deal TCV (US$ mn) Net new (%) (RHS)
Source: Company, PL
Infosys
January 14, 2021 5
Margins sustained at 25%
24.1
%
24.2
%
24.3
%
24.7
%
23.7
%
23.7
%
22.6
%
21.4
%
20.5
%
21.7
%
21.9
%
21.2
%
22.7
%
25.3
%
25.4
%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
26.0%
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
3Q
20
4Q
20
1Q
21
2Q
21
3Q
21
EBIT Margins
Source: Company, PL
SGA Expenses steadily declining
2,5
87
2,5
51
2,5
69
2,6
51
2,7
28
2,7
55
2,8
05
2,8
31
2,9
21
2,9
87
3,0
60
3,1
31
3,2
10
3,2
43
3,1
97
3,1
21
3,3
12
3,5
16
5.2
%
5.1
%
5.2
%
5.2
%
4.8
%
4.9
%
5.2
%
5.3
%
5.3
%
5.4
%
5.7
%
5.4
%
5.1
%
5.2
%
5.0
%
5.2
%
4.8
%
4.6
%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2Q
17
3Q
17
4Q
17
1Q
18
2Q
18
3Q
18
4Q
18
1Q
19
2Q
19
3Q
19
4Q
19
1Q
20
2Q
20
3Q
20
4Q
20
1Q
21
2Q
21
3Q
21
USD Revenues (USD Mn) S&M expenses (% of revenues)
Source: Company, PL
Strong growth momentum in BFSI
904
914
900
941
971
967
983
1,0
24
1,0
22
1,0
01
983
1,0
60
1,1
64
0.1%1.2%
-1.5%
4.5%3.2%
-0.4%
1.7%
4.2%
-0.2%
-2.0%-1.8%
7.8%
9.8%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-
200
400
600
800
1,000
1,200
1,400
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
BFSI Revenue (USD mn) BFSI Revenue $ Growth (QoQ)
Source: Company, PL
The margins benefited from Cost
reduction measure like i) hiring freeze
ii) Reducing on discretionary spends
like branding, marketing, re-
negotiation of rates iii) Traditional
levers like mix, deploying automation,
etc.iv) No travel cost.
Infosys
January 14, 2021 6
Retail growth is back on track
446
446
470
491
490
487
495
488
496
496
446
493
517
2.3%-0.1%
5.4% 4.4%
-0.2%-0.7%1.7%
-1.4%
1.7%-0.1%
-9.9%
10.6%
4.7%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
400
420
440
460
480
500
520
540
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
Retail Revenue (USD mn) Retail Revenue $ Growth (QoQ)
Source: Company, PL
Strong recovery in manufacturing
264
269
272
280
302
306
301
324
334
323
296
301
327
3.1%1.8%
0.9%
3.2%
7.6%
1.4%
-1.8%
7.9%
3.0%
-3.3%
-8.2%
1.7%
8.5%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0
50
100
150
200
250
300
350
400
3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
Manufacturing Revenue (USD mn)
Manufacturing Revenue $ Growth (QoQ)
Source: Company, PL
Valuation
Infosys has aggressively realigned its strategic focus to scale digital transformation
projects over the last couple of years. This includes significant investments in sales,
increased large deal participation, and increased flexibility on deal structure. This
has been rewarded with a sharp increase in large transformation deals around DX
projects, hybrid cloud adoption, and automation.
Infosys stays our top pick in the sector as it benefits from near term margin defense
and long term growth acceleration from DX/cloud/AI megatrends.
We are assigning 27X multiple (earlier 24X, 11% discount to TCS multiple) to Infy
as we believe higher multiple is justified due to following factors 1) Strong revenue
acceleration 2) Best in class metrics along with broad based recovery 3) Excellent
supply chain mechanism 4) Strong dividend payouts 5) All time high deal wins. We
have increased our EPS estimates by 4.7% each in FY22/23E. We value Infy at
27x to arrive at a changed target price of INR 1611 (earlier: INR1538) on FY23 EPS
of Rs. 59.7. Infy is currently trading at 25.5X/23.2X FY22/23 earnings of INR
54.5/59.7 on FY22/23E respectively. Reiterate BUY.
Infosys
January 14, 2021 7
Changes in Estimates
FY21E FY22E FY23E
USD revenues (US$ m)
- New 13,521 15,420 17,058
- Old 13,421 15,101 16,664
Change (%) 0.8% 2.1% 2.4%
EBIT Margin
- New 24.2% 24.0% 23.3%
- Old 24.3% 23.0% 22.5%
Change (%) -9 bps 100 bps 79 bps
Recurring EPS - Fully diluted (Rs)
- New 45.2 54.4 59.6
- Old 46.0 51.9 56.9
Change (%) -1.6% 4.7% 4.7%
Source: PL
Key Financials
Rs m FY20 1Q21 2Q21 3Q21 4Q21 FY21E FY22E FY23E
Revenue (US$ m) 12,781 3,121 3,312 3,516 3,572 13,521 15,420 17,058
Revenue 9,07,910 2,36,650 2,45,700 2,59,270 2,64,352 10,05,972 11,71,898 13,13,437
Cost of revenue 6,07,320 1,57,030 1,57,710 1,67,770 1,71,874 6,54,384 7,76,469 8,56,631
Gross profit 3,00,590 79,620 87,990 91,500 92,478 3,51,588 3,95,429 4,56,806
Gross margin 33.1% 33.6% 35.8% 35.3% 35.0% 35.0% 33.7% 34.8%
Operating expenses 1,06,850 25,970 25,710 25,610 30,400 1,07,690 1,14,138 1,51,184
EBITDA 2,22,670 61,210 70,830 74,150 70,053 2,76,243 3,13,763 3,34,788
EBITDA margin 24.5% 25.9% 28.8% 28.6% 26.5% 27.5% 26.8% 25.5%
Depreciation & Amortisation 28,930 7,560 8,550 8,260 7,976 32,346 32,472 29,165
EBIT 1,93,740 53,650 62,280 65,890 62,077 2,43,897 2,81,291 3,05,622
EBIT margin 21.3% 22.7% 25.3% 25.4% 23.5% 24.2% 24.0% 23.3%
Other income 28,030 4,750 5,700 6,110 5,266 21,826 27,920 28,347
Profit before tax 2,20,080 57,920 67,500 71,510 66,853 2,63,783 3,07,211 3,31,969
PAT 1,66,410 42,330 48,450 51,970 48,461 1,92,251 2,31,171 2,53,160
EPS- Diluted 39.0 10.0 11.4 12.2 11.4 45.2 54.4 59.6
Source: Company, PL
Infosys One year forward PE
28.7
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
30.0
Apr-
10
Aug-1
0D
ec-1
0A
pr-
11
Aug-1
1D
ec-1
1A
pr-
12
Aug-1
2D
ec-1
2A
pr-
13
Aug-1
3D
ec-1
3A
pr-
14
Aug-1
4D
ec-1
4A
pr-
15
Aug-1
5D
ec-1
5A
pr-
16
Aug-1
6D
ec-1
6A
pr-
17
Aug-1
7D
ec-1
7M
ay-1
8S
ep-1
8Jan-1
9M
ay-1
9S
ep-1
9Jan-2
0M
ay-2
0S
ep-2
0Jan-2
1
P/E Mean Mean + Std Dev Mean - Std Dev
Source: Company, PL
Infosys
January 14, 2021 8
TCS One Year Forward P/E chart
12.3
16.2
23.7
26.8
19.3
27.8 27.8
10.0
15.0
20.0
25.0
30.0
35.0
Apr-
10
Aug-1
0
Dec-1
0
Apr-
11
Aug-1
1
Dec-1
1
May-1
2
Sep-1
2
Jan-1
3
May-1
3
Sep-1
3
Jan-1
4
Jun-1
4
Oct-14
Feb-1
5
Jun-1
5
Oct-15
Feb-1
6
Jul-16
Nov-1
6
Mar-
17
Jul-17
Nov-1
7
Mar-
18
Aug-1
8
Dec-1
8
Apr-
19
Aug-1
9
Dec-1
9
May-2
0
Sep-2
0
Jan-2
1
P/E Mean Mean + Std Dev Mean - Std Dev
Source: Company, PL
Geography-wise revenues
(US$ m) 3Q21 2Q21 QoQ gr. 3Q20 YoY gr.
North America 2,166 2,010 7.7% 1,988 8.9%
Europe 844 805 4.8% 791 6.6%
India 91 99 -8.0% 91 0.7%
Rest of World 415 397 4.4% 373 11.2%
Total 3,516 3,312 6.2% 3,243 8.4%
as % of Total
North America 61.6% 60.7% 90 bps 61.3% 30 bps
Europe 24.0% 24.3% -30 bps 24.4% -40 bps
India 2.6% 3.0% -40 bps 2.8% -20 bps
Rest of World 11.8% 12.0% -20 bps 11.5% 30 bps
Source: Company, PL
Vertical-wise revenues
3Q21 2Q21 QoQ gr. 3Q20 YoY gr.
Financial Services 1,164 1,060 9.8% 1,022 13.9%
Manufacturing 327 301 8.5% 334 -2.1%
Communication Services 436 417 4.5% 415 5.0%
Retail CPG 517 493 4.7% 496 4.2%
Life Sc & Healthcare 250 225 10.8% 217 14.9%
Others 823 815 1.0% 759 8.4%
Total 3,516 3,312 6.2% 3,243 8.4%
as % of Total
Financial Services 33.1% 32.0% 110 bps 31.5% 160 bps
Manufacturing 9.3% 9.1% 20 bps 10.3% -100 bps
Communication Services 12.4% 12.6% -20 bps 12.8% -40 bps
Retail CPG 14.7% 14.9% -20 bps 15.3% -60 bps
Life Sc & Healthcare 7.1% 6.8% 30 bps 6.7% 40 bps
Others 23.4% 24.6% -120 bps 23.4% 0 bps
Source: Company, PL
Infosys
January 14, 2021 9
Client Metrics
3Q21 2Q21 QoQ gr. 3Q20 YoY gr.
Number of Clients
Active 1562 1487 5.0% 1384 12.9%
Added during the period 139 96 44.8% 84 65.5%
Revenue concentration (US$ m)
Top 10 clients 650 619 5.0% 613 6.1%
Top 25 clients 1,217 1,133 7.4% 1,109 9.7%
Top 11-25 clients 566 513 10.3% 496 14.1%
Non Top 25 2,299 2,179 5.5% 2,134 7.8%
Total 3,516 3,312 6.2% 3,243 8.4%
Revenue concentration (%)
Top 10 clients 18.5% 18.7% -20 bps 18.9% -40 bps
Top 25 clients 34.6% 34.2% 40 bps 34.2% 40 bps
Repeat Business 95.1% 98.0% -290 bps 97.2% -210 bps
Repeat Business (in US$ m) 3,344 3,246 3.0% 3,152 6.1%
New Business (in US$ m) 172 66 160.1% 91 89.7%
Account Receivables (days) 73 69 4 73 -
Source: Company, PL
Utilization improved by 270 bps QoQ
3Q21 2Q21 QoQ gr. 3Q20 YoY gr.
Utilization (%)
Include Trainees 82.3% 80.6% 170 bps 80.4% 190 bps
Exclude Trainees 86.3% 83.6% 270 bps 84.4% 190 bps
Source: Company, PL
Sharp rise in Digital revenues (50% revenue share)
Revenues by offering 3Q21 2Q21 QoQ gr. 3Q20 YoY gr.
Digital 50.1% 47.3% 280 bps 40.6% 950 bps
Core 49.9% 52.7% -280 bps 59.4% -950 bps
Services 92.9% 92.5% 40 bps 94.0% -110 bps
Products & platforms 7.1% 7.5% -40 bps 6.0% 110 bps
Revenue by offering ( $mn)
Digital 1,625 1,534 5.9% 1317 23.4%
Core 1,618 1,709 -5.3% 1926 -16.0%
Services 3,266.36 3,063.00 6.6% 3,067.88 6.5%
Products & platforms 250 249 0.3% 175 42.5%
Source: Company, PL
Infosys
January 14, 2021 10
Financials
Income Statement (Rs m)
Y/e Mar FY20 FY21E FY22E FY23E
Net Revenues 9,07,910 10,05,972 11,71,898 13,13,437
YoY gr. (%) 9.8 10.8 16.5 12.1
Employee Cost 5,78,390 6,22,038 7,43,997 8,27,465
Gross Profit 3,29,520 3,83,934 4,27,901 4,85,972
Margin (%) 36.3 38.2 36.5 37.0
SG&A Expenses 59,730 61,525 58,595 59,244
Other Expenses - - - -
EBITDA 2,22,670 2,76,243 3,13,763 3,34,788
YoY gr. (%) 6.6 24.1 13.6 6.7
Margin (%) 24.5 27.5 26.8 25.5
Depreciation and Amortization 28,930 32,346 32,472 29,165
EBIT 1,93,740 2,43,897 2,81,291 3,05,622
Margin (%) 21.3 24.2 24.0 23.3
Net Interest - - - -
Other Income 26,340 19,886 25,920 26,347
Profit Before Tax 2,20,080 2,63,783 3,07,211 3,31,969
Margin (%) 24.2 26.2 26.2 25.3
Total Tax 53,680 71,873 76,040 78,809
Effective tax rate (%) 24.4 27.2 24.8 23.7
Profit after tax 1,66,400 1,91,911 2,31,171 2,53,160
Minority interest (10) (340) - -
Share Profit from Associate - - - -
Adjusted PAT 1,66,410 1,92,251 2,31,171 2,53,160
YoY gr. (%) 8.0 15.5 20.2 9.5
Margin (%) 18.3 19.1 19.7 19.3
Extra Ord. Income / (Exp) - - - -
Reported PAT 1,66,410 1,92,251 2,31,171 2,53,160
YoY gr. (%) 8.0 15.5 20.2 9.5
Margin (%) 18.3 19.1 19.7 19.3
Other Comprehensive Income - - - -
Total Comprehensive Income 1,66,410 1,92,251 2,31,171 2,53,160
Equity Shares O/s (m) 4,258 4,242 4,243 4,243
EPS (Rs) 39.1 45.3 54.5 59.7
Source: Company Data, PL Research
Balance Sheet Abstract (Rs m)
Y/e Mar FY20 FY21E FY22E FY23E
Non-Current Assets
Gross Block 3,55,720 4,45,672 4,87,389 4,95,610
Tangibles 2,83,860 3,61,252 4,02,969 4,11,190
Intangibles 71,860 84,420 84,420 84,420
Acc: Dep / Amortization 1,46,870 1,78,993 2,11,466 2,18,364
Tangibles 1,46,870 1,78,993 2,11,466 2,18,364
Intangibles - - - -
Net fixed assets 2,08,850 2,66,679 2,75,923 2,77,246
Tangibles 1,36,990 1,82,259 1,91,503 1,92,826
Intangibles 71,860 84,420 84,420 84,420
Capital Work In Progress - - - -
Goodwill - - - -
Non-Current Investments - - - -
Net Deferred tax assets 7,760 3,910 3,910 3,910
Other Non-Current Assets 1,13,950 1,51,630 1,51,630 1,51,630
Current Assets
Investments - - - -
Inventories - - - -
Trade receivables 1,84,870 2,06,224 2,22,661 2,23,650
Cash & Bank Balance 2,33,040 2,90,631 4,33,269 4,75,266
Other Current Assets 56,640 60,830 60,830 60,830
Total Assets 9,27,680 10,53,693 12,26,937 12,73,467
Equity
Equity Share Capital 21,220 21,230 21,230 21,230
Other Equity 6,37,220 7,27,385 8,66,910 9,03,132
Total Networth 6,58,440 7,48,615 8,88,140 9,24,362
Non-Current Liabilities
Long Term borrowings - - - -
Provisions - - - -
Other non current liabilities 51,000 60,450 60,450 60,450
Current Liabilities
ST Debt / Current of LT Debt - - - -
Trade payables 28,520 4,024 4,688 4,836
Other current liabilities 1,80,040 2,32,204 2,65,260 2,75,420
Total Equity & Liabilities 9,27,680 10,53,693 12,26,937 12,73,467
Source: Company Data, PL Research
Infosys
January 14, 2021 11
Cash Flow (Rs m)
Y/e Mar FY20 FY21E FY22E FY23E Year
PBT 2,20,080 2,63,783 3,07,211 3,31,969
Add. Depreciation 28,930 32,346 32,472 29,165
Add. Interest - - - -
Less Financial Other Income 26,340 19,886 25,920 26,347
Add. Other - - - -
Op. profit before WC changes 2,49,010 2,96,129 3,39,684 3,61,134
Net Changes-WC 38,130 (20,285) 12,357 7,098
Direct tax (53,680) (71,873) (76,040) (78,809)
Net cash from Op. activities 2,33,460 2,03,972 2,76,001 2,89,423
Capital expenditures (61,910) (90,175) (41,717) (30,488)
Interest / Dividend Income - - - -
Others - - - -
Net Cash from Invt. activities (61,910) (90,175) (41,717) (30,488)
Issue of share cap. / premium 1,560 2,290 - -
Debt changes - - - -
Dividend paid (89,132) (1,42,547) (91,646) (1,01,829)
Interest paid - - - -
Others (67,488) 37,241 - (1,15,109)
Net cash from Fin. activities (1,55,060) (1,03,016) (91,646) (2,16,938)
Net change in cash 16,490 10,781 1,42,638 41,997
Free Cash Flow 1,71,550 1,13,797 2,34,284 2,58,935
Source: Company Data, PL Research
Quarterly Financials (Rs m)
Y/e Mar Q4FY20 Q1FY21 Q2FY21 Q3FY21
Net Revenue 2,32,670 2,36,650 2,45,700 2,59,270
YoY gr. (%) 8.0 8.5 8.6 12.3
Raw Material Expenses 1,47,520 1,49,470 1,49,160 1,59,510
Gross Profit 85,150 87,180 96,540 99,760
Margin (%) 36.6 36.8 39.3 38.5
EBITDA 56,760 61,210 70,830 74,150
YoY gr. (%) 10.2 18.8 25.6 27.8
Margin (%) 24.4 25.9 28.8 28.6
Depreciation / Depletion 7,490 7,560 8,550 8,260
EBIT 49,270 53,650 62,280 65,890
Margin (%) 21.2 22.7 25.3 25.4
Net Interest - - - -
Other Income 5,690 4,270 5,220 5,620
Profit before Tax 54,960 57,920 67,500 71,510
Margin (%) 23.6 24.5 27.5 27.6
Total Tax 11,610 15,200 18,920 19,360
Effective tax rate (%) 21.1 26.2 28.0 27.1
Profit after Tax 43,350 42,720 48,580 52,150
Minority interest (140) (390) (130) 180
Share Profit from Associates - - - -
Adjusted PAT 43,210 42,330 48,450 52,330
YoY gr. (%) 6.1 11.5 20.6 17.4
Margin (%) 18.6 17.9 19.7 20.2
Extra Ord. Income / (Exp) - - - -
Reported PAT 43,210 42,330 48,450 52,330
YoY gr. (%) 6.1 11.5 20.6 17.4
Margin (%) 18.6 17.9 19.7 20.2
Other Comprehensive Income - - - -
Total Comprehensive Income 43,210 42,330 48,450 52,330
Avg. Shares O/s (m) 4,246 4,246 4,249 4,251
EPS (Rs) 10.2 10.0 11.4 12.3
Source: Company Data, PL Research
Key Financial Metrics
Y/e Mar FY20 FY21E FY22E FY23E
Per Share(Rs)
EPS 39.1 45.3 54.5 59.7
CEPS 45.9 52.9 62.1 66.5
BVPS 154.6 176.5 209.3 217.9
FCF 40.3 26.8 55.2 61.0
DPS 20.9 33.6 21.6 24.0
Return Ratio(%)
RoCE 29.6 34.7 34.4 33.7
ROIC 30.8 34.0 33.1 32.1
RoE 25.4 27.3 28.2 27.9
Balance Sheet
Net Debt : Equity (x) (0.4) (0.4) (0.5) (0.5)
Debtor (Days) 74 75 69 62
Valuation(x)
PER 35.5 30.6 25.5 23.2
P/B 9.0 7.9 6.6 6.4
P/CEPS 30.2 26.2 22.3 20.8
EV/EBITDA 25.5 20.2 17.4 16.2
EV/Sales 6.2 5.6 4.7 4.1
Dividend Yield (%) 1.5 2.4 1.6 1.7
Source: Company Data, PL Research
Infosys
January 14, 2021 12
Price Chart Recommendation History
No. Date Rating TP (Rs.) Share Price (Rs.)
1 04-Jan-21 BUY 1,538 1,260
2 23-Dec-20 BUY 1,436 1,221
3 15-Oct-20 BUY 1,436 1,137
4 05-Oct-20 BUY 1,259 1,018
5 01-Oct-20 BUY 1,259 1,008
6 16-Jul-20 BUY 1,037 831
7 04-Jul-20 Hold 788 763
8 21-Apr-20 Hold 668 651
9 12-Apr-20 BUY 693 636
10 11-Feb-20 BUY 820 773
Analyst Coverage Universe
Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 Coforge BUY 2,966 2,722
2 Cyient BUY 606 514
3 HCL Technologies BUY 1,152 951
4 Infosys BUY 1,538 1,260
5 L&T Technology Services BUY 2,509 2,410
6 Larsen & Toubro Infotech BUY 3,714 3,694
7 Mindtree BUY 1,792 1,659
8 Mphasis BUY 1,802 1,530
9 Persistent Systems BUY 1,526 1,498
10 Redington (India) BUY 138 133
11 Sonata Software BUY 437 393
12 Tata Consultancy Services BUY 3,358 2,928
13 TeamLease Services BUY 2,931 2,666
14 Tech Mahindra BUY 1,099 978
15 Wipro BUY 434 388
16 Zensar Technologies BUY 257 243
PL’s Recommendation Nomenclature (Absolute Performance)
Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
526
726
926
1125
1325
Jan
- 1
8
Jul -
18
Jan
- 1
9
Jul -
19
Jan
- 2
0
Jul -
20
Jan
- 2
1
(Rs)
Infosys
January 14, 2021 13
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