Technology

For 4QFY2016, Infosys posted revenues of US$2,454mn (V/s US$2,446mn
expected), up 1.6% qoq. In constant currency (CC) terms, the growth is of
~1.9%. Volume growth during the period is of 2.4% qoq. On the operating
front, the EBIT margin came in at 25.5% vs our expectation of 25.2% and vs
24.9% in 3QFY2016, ie an expansion of 60bp qoq. The utilization levels
(including trainees) improved to 74.7% V/s 74.2% in 3QFY2016, while the
attrition rate was of 17.3% V/s 18.1% in 3QFY2016. The company posted a net
profit of Rs3,597cr (V/s Rs3,634cr expected), up 3.8% qoq. For FY2017, the
company has given a revenue guidance at 11.5%-13.5% in CC terms and
11.8%-13.8% in US$ terms at March 31, 2016 exchange rates. We maintain our
Accumulate rating on the stock with a target price of Rs1,378.
Quarterly highlights: For 4QFY2016, Infosys posted revenues of US$2,454mn
(V/s US$2,446mn expected), up 1.6% qoq. In constant currency (CC) terms, the
growth is of ~1.9%. Volume growth during the period is of 2.4% qoq. In terms of
geography, North America grew 0.5% sequentially and by 0.6% in CC terms,
while Europe grew 2.4% sequentially and by 3.6% in CC terms. In terms of
industries, FSI grew by 0.2%, MFG & Hi-Tech grew by 0.8%, RCL grew by 2.7%
and ECS grew by 4.9%, all in CC terms. On the operating front, the EBIT margin
came in at 25.5% vs our expectation of 25.2% and vs 24.9% in 3QFY2016, an
expansion of 60bp qoq. The company posted a net profit of Rs3,597cr (V/s
Rs3,634cr expected), up 3.8% qoq.
Outlook and valuation: For FY2017, the company has given a revenue guidance
at 11.5%-13.5% in CC and 11.8%-13.8% in US$ terms at March 31, 2016
exchange rates. It gave a guidance of achieving sales of US$20bn by FY2020.
We maintain our Accumulate rating on the stock.

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