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October 11, 2013


Rating matrix
Rating Target Target Period Potential Upside : : : : Under review Under review Under review Under review

Infosys Ltd (INFTEC)


| 3124
FY15E 48,044 13,160 27.4 10,350 181.1

Key Financials
(| crore) Net Sales EBITDA EBITDA margin (%) Net Profit EPS (|) FY12 33,734 10,708 31.7 8,316 145.5 FY13 40,352 11,551 28.6 9,421 164.9 FY14E 45,339 12,272 27.1 9,956 174.2

Beats estimates
Infosys reported its Q2FY14 earnings, which were generally ahead of our and consensus estimates. Dollar revenues grew 3.8% QoQ (2.6% estimate) led by volumes (+3.1% vs. +4.1% Q1), while those in constant currency grew 4.2% QoQ (50 bps cross currency impact). Gross margins improved ~29 bps QoQ as margin headwinds from wage hikes were likely offset by tailwinds from rupee depreciation. Adjusted EBIT (onetime visa charge of | 219 crore) at 23.6% was lower than our 24.3% estimate but flat QoQ. Net income was lower (| 2,407 crore vs. 2,680 crore estimate) led by one-time charge and lower other income.

Valuation summary
FY12 PE (x) Target PE (x) EV to EBITDA (x) Price to book (x) RoNW (%) RoCE (%) 21.5 18.2 14.2 5.3 27.4 32.2 FY13 18.9 16.1 13.1 4.5 25.7 28.5 FY14E 17.9 15.2 12.4 3.8 23.0 25.5 FY15E 17.2 14.6 11.5 3.3 20.7 23.7

Broad based growth


Growth was broad based across geographies with US, Europe leading quarterly growth (+3.9%, +5.2% QoQ) aided by India (-2.5%) & RoW (1.8%). Manufacturing had another good quarter (reported 6.8%; constant currency 6.6% QoQ) while FSI (2.9%, 3.9%) and energy (+4.7% vs. -1.6% in Q1) helped. Retail & life sciences was tepid (1.4% vs. 6.3% in Q1). App dev (5.7%), IMS (6.7%), PES (7%) led, helped by BPM & testing (3.8% each). Utilisation picked up (+130 bps including trainees and 190 excluding) to 73.7% and 77.8%, respectively. Attrition increased 40 bps QoQ to 17.3% (16.9% in Q1) but declined on an absolute basis. We would revisit our estimates and come out with a detailed report shortly.
Exhibit 1: Financial performance
(| crore) Net Sales EBIT Margin (%) Depreciation Interest Other Income Reported PAT EPS (|) Q2FY14 12,965 21.9 333 510 2,407 42.1 Q2FY14E 12,683 24.3 329 620 2,680 46.9 Q1FY14 11,267 23.6 319 577 2,374 41.5 Q2FY13 9,858 26.3 271 706 2,369 41.5 QoQ(Ch %) 15.1 177 bps dip 4.4 (11.6) 1.4 1.4 YoY(Ch%) 31.5 446 bps dip 22.9 (27.8) 1.6 1.6

Stock data
Market Capitalisation Debt (Sep-13) Cash & cash Equivalents (Sep-13) EV 52 week H/L (|) Equity capital Face value DII Holding (%) FII Holding (%) | 178509 Crore | 0 crore | 26907 Crore | 151602 Crore 3188 / 2190 | 286 crore |5 16.2 39.9

Analysts name
Abhishek Shindadkar abhishek.shindadkar@icicisecurities.com Hardik Varma hardik.varma@icicisecurities.com

Source: Company, ICICIdirect.com Research

ANALYST CERTIFICATION
We /I, Abhishek Shindadkar, MBA, Hardik Varma, MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. 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. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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