Infosys

India Equity Research | Information Technology

October 16, 2018
Result Update Emkay
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Refer to important disclosures at the end of this report

CMP Target Price

Margin concerns should take Rs 695

as of (October 16, 2018)
Rs 580 (▲)
12 months

precedence over improved outlook Rating

SELL (■)
Upside
(16.6) %

Change in Estimates
 Infosys’s Q2FY19 growth of 4.2% in CC terms was above our/Street expectations of
2.5%/3.0%. While overall pricing is expected to remain stable going ahead, qoq realization EPS Chg FY19E/FY20E (%) (1.5)/0.7

improvement of 0.9% in Q2FY19 came in as a surprise. Target Price change (%) 5.5
Target Period (Months) 12
 EBIT margins of 23.7% remained flat qoq despite significant currency tailwinds (80bps)
Previous Reco SELL
and pricing improvement (70bps) due to an increase in sub-contractor costs, wage hikes,
Emkay vs Consensus
and compensation increases to curb increasing attrition (22.2% vs. 10.9% for TCS).
EPS Estimates
 While the order book increased substantially (US$2.0bn in Q2 vs. US$1.1bn in Q1),
FY19E FY20E
revenue growth guidance remains unchanged at 6-8% due to new deal revenue lag and
Emkay 36.1 39.9
H2 seasonality. We expect margins to drift toward the lower end of the margin band (22-
Consensus 37.6 41.7
24%) in FY19 as planned investments (H2 heavy) and new deal ramp-up costs kick in.
Mean Consensus TP (12M) Rs 768
 Revenue outlook for FY20 improved slightly on good Q2 growth, better commentary Stock Details
overall, and large-deal TCV, but weaker margin estimates could lead to street’s EPS
Bloomberg Code INFO IN
downgrades. We maintain a Sell rating, with a TP of Rs580 (based on 14xSep’20E EPS).
Face Value (Rs) 5
Shares outstanding (mn) 4,368
Growth outlook improves but at the cost of margins 52 Week H/L 755 / 454
Commentary turned incrementally positive across regions and verticals (except the M Cap (Rs bn/USD bn) 3,037 / 41.23
Healthcare segment – 6.5% of revenues), with strong large-deal wins (US$2.0bn in TCV in Daily Avg Volume (nos.) 9,117,705
Q2 vs. 1.2bn in Q1; ~60%+ coming from net new deals and well spread across
Daily Avg Turnover (US$ mn) 87.0
markets/verticals). However, profitability continues to remain a concern as Infosys reinvested
150bps gains from currency/offshore mix advantage back into the business to fund higher Shareholding Pattern Sep '18
salary hikes to curb attrition (80bps) and increased sub-contracting charges (up 70bps qoq) Promoters 12.8%
in Q2FY19. Going ahead, we believe that H2 heavy planned investments in
FIIs 35.1%
Digital/Training/Sales/Local hiring and incremental costs related to new deal ramp-ups in
DIIs 22.1%
H2FY19 should further drift margins toward the lower end of the guided range of 22%-24%
for FY19 (H1FY19 OPM stood at 23.7%). Public and Others 30.0%

Price Performance
Imminent margin concerns to bring down consensus EPS estimates;
maintain Sell (%) 1M 3M 6M 12M
Absolute (5) 4 24 49
With no upward revision in revenue growth and margin band guidance despite improved
outlook and the significant INR depreciation in FY19, we expect a cut in consensus earnings Rel. to Nifty 3 8 23 44
estimates which could further lead to a consensus de-rating of the stock. While our FY19 Relative price chart
revenue outlook improves slightly on the back of good Q2, our earnings estimates remain flat 750 Rs % 60

due to the uninspiring commentary on margin improvement. We believe that our lower multiple 690 46

for Infosys is justified (14x vs. 21x for TCS) given the growth differential of ~30% and the
630 32
expected decline (-100bps) in margins for Infosys vs. margin improvement (100-150bps) for
TCS. Maintain Sell rating, with a TP of Rs580 (based on Sep’20E EPS). 570 18

510 4

450 -10
Financial Snapshot (Consolidated) Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

Infosys (LHS) Rel to Nifty (RHS)

(Rs mn) FY17 FY18 FY19E FY20E FY21E
Source: Bloomberg
Revenue 684,840 705,220 819,677 905,639 969,460
EBITDA 186,040 189,248 210,958 232,977 249,398 This report is solely produced by Emkay Global. The
following person(s) are responsible for the production
EBITDA Margin (%) 27.2 26.8 25.7 25.7 25.7 of the recommendation:

APAT 143,530 145,970 157,063 173,731 184,949 Rahul Jain

EPS (Rs) 31.3 33.5 36.1 39.9 42.5 rahul.jain@emkayglobal.com
EPS (% chg) 6.4 7.0 7.6 10.6 6.5 +91-022-266121253
ROE (%) 22.0 21.8 23.0 22.9 21.8 Devanshu Bansal
P/E (x) 22.2 20.7 19.3 17.4 16.4 devanshu.bansal@emkayglobal.com
EV/EBITDA (x) 15.9 15.0 13.5 12.2 11.4 +91-22-66121385
P/BV (x) 4.6 4.7 4.2 3.8 3.4
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer
to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA

 Infosys (INFO IN) India Equity Research | Result Update

Exhibit 1: Actual vs. Estimates

Estimate % variation
(in Rs mn) Actual Comment
Emkay Consensus Emkay Consensus
Revenues (in US$ mn) 2,921 2,860 2,737 2.1% 6.7%
Sales 2,06,090 2,00,199 2,03,186 2.9% 1.4%
Infosys’s Q2FY19 revenue growth was better
EBIT 48,940 48,448 49,447 1.0% -1.0% than our/Street expectations, but lower-than-
expected margins led to in-line profits.
EBIT, margin 23.7% 24.2% 24.3% -50 bps -60 bps
PAT 41,100 41,016 40,485 0.2% 1.5%
Source: Company, Emkay Research

Exhibit 2: Quarterly snapshot

Rs mn Q2FY18 Q1FY19 Q2FY19 YoY (%) QoQ (%) YTD FY18 YTD FY19 YoY (%)
Revenues(in US$ mn) 2,728 2,831 2,921 7.1 3.2 5,379 5,752 6.9
Revenue 1,75,670 1,91,280 2,06,090 17.3 7.7 3,46,450 3,97,370 14.7
Operating Expenditure 1,33,210 1,45,910 1,57,150 18.0 7.7 2,62,880 3,03,061 15.3
Cost of revenues 1,12,270 1,22,880 1,32,810 18.3 8.1 2,21,270 2,55,690 15.6
as % of sales 63.9 64.2 64.4 63.9 64.3
SG&A expenses 20,940 23,030 24,340 16.2 5.7 41,610 47,371 13.8
as % of sales 11.9 12.0 11.8 12.0 11.9
EBIT 42,460 45,370 48,940 15.3 7.9 83,570 94,309 12.9
Other Income 8,830 4,560 7,390 (16.3) 62.1 16,260 11,950 (26.5)
PBT 51,290 49,930 56,329.58 9.8 12.8 99,830 1,06,259 6.4
Total Tax 14,030 13,810 15,230 8.6 10.3 27,740 29,040 4.7
Adjusted PAT 37,260 36,120 41,100 10.3 13.8 72,090 77,219 7.1
APAT after MI 37,260 36,120 41,100 10.3 13.8 72,090 77,219 7.1
Reported PAT 37,260 36,120 41,100 10.3 13.8 72,090 77,219 7.1
Reported EPS 8.6 8.3 9.5 10.3 13.8 16.2 17.8 9.7

Margins (%) (bps) (bps) (bps)

EBIT 24.2 23.7 23.7 (42) 3 24.1 23.7 (39)
EBT 29.2 26.1 27.3 (186) 123 28.8 26.7 (207)
PAT 21.2 18.9 19.9 (127) 106 20.8 19.4 (138)
Effective Tax rate 27.4 27.7 27.0 (32) (62) 27.8 27.3 (46)
Source: Company, Emkay Research

Exhibit 3: Change in Estimates

(All fig in Rs mn FY19E FY20E FY21E
except EPS) Old New % Chg. Old New % Chg. Introducing
Revenues(US$ mn) 11,592 11,700 0.9% 12,476 12,578 0.8% 13,465
YoY growth, % 6.0% 7.0% 7.6% 7.5% 7.0%
Revenues 8,10,471 8,19,677 1.1% 898271 9,05,639 0.8% 9,69,460
EBIT 1,93,118 1,90,167 -1.5% 208204 2,09,920 0.8% 2,24,717
EBIT margins, % 23.8 23.2 23.2 23.2 23.2
Net profits 1,59,133 1,56,686 -1.5% 171801 1,72,933 0.7% 1,84,887
EPS 36.6 36.0 -1.5% 39.5 39.7 0.7% 42.5
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 2

 Infosys (INFO IN) India Equity Research | Result Update

Outlook improves at the cost of profitability

 Digital growth healthy but relatively larger peer growing at a significant higher rate:
Digital (~31% of sales) grew by ~32% yoy (vs. ~60% yoy growth for TCS) and overall
revenue grew by ~8% yoy in CC terms (vs. 11.5% for TCS). Infosys stated that it is seeing
traction in Cloud, Data Analytics, IOT and Customer Experience areas, with the help of its
three recent acquisitions –Brilliant Basics, Wongdoody, and Fluido.
Exhibit 4: Digital – Quarterly revenue and growth trends

1000 906 14
804 12
719 752
800 687 12.6
634 10
600 8
8.5
400 4.6 7.0 6
4.5 4
200
2
0 0
Jun'17 Sep'17 Dec'17 Mar'18 Jun'18 Sep'18

Digital Revenues Growth qoq %

Source: Company, Emkay Research

 Commentary improves on broad-based improvement in large-deal TCV: Infosys had

12 large deal wins during the quarter, of which 7 were in Americas and 4 in Europe, and 1
in RoW. Among the verticals, 3 large deal wins were in Financial Services and
Manufacturing each, 2 in Hi-Tech and 1 each in Retail, Telecom and other vertical. Around
60% of the total large-deal TCV came from net new deals (vs. 47% in Q1FY19). On the
uptick in large deal wins, Infosys stated that it is trying to improve deal originations by
increasing engagements with deal advisors, tapping best talent within Infosys and
incentivizing people to increase large deal wins. However, the company stated that such
deal wins are competitive at the start and the margin profile of such deals improve only
gradually with the help of Automation and AI.
Exhibit 5: Large Deal TCV see a sudden uptick but management indicates quarterly lumpiness

2000
2500

2000
1227

1207

1116
1500
983
962

905
809

806

779
731
700
700

688

664

657
600
550

1000
500
450

414
213

500

0
Jun'15

Jun'17

Jun'18
Mar'14

Mar'15

Mar'16

Mar'17

Mar'18
Dec'14
June'13
Sep'13
Dec'13

June'14
Sep'14

Sep'15
Dec'15

June'16
Sep'16
Dec'16

Sep'17
Dec'17

Sep'18

TCV (in USD mn)

Source: Company, Emkay Research

 Future Outlook remains intact despite improved outlook and INR depreciation: Outlook
remains unchanged with revenue growth (6-8% CC growth in FY19) and margin band (22-24%)
guidance despite improved outlook and the significant INR depreciation in FY19. H2FY19
seasonality and the expected lag in revenue outflow for large deals, coupled with heavy planned
investments in H2FY19 were stated to be the reason behind unchanged outlook.
 BFSI (up 5.8% qoq in CC terms; 33.1% of sales) and Retail (up 5.9% qoq in CC terms;
~16% of sales) commentary improves but Infosys indicates H2FY19 seasonality:
While it re-iterated that momentum in Regional Banks, Insurance and Europe continues to
be strong, it also indicated that spends in the US and certain top accounts have started to
improve. While its outlook improved due to improved macros leading to improved spending,
it expects H2FY19 seasonality to affect BFSI growth. For platforms, it indicated that while
demand for large-scale platform implementations is limited, lot of interest is emerging in
Digital and Blockchain surrounding these platforms (Finnacle and Mc-Camish). For Retail,
it expects growth revival on the increased focus on modernization and strong deal pipeline.

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 3

 Infosys (INFO IN) India Equity Research | Result Update

Exhibit 6: Top 10 yoy clients' growth in USD terms (%) improved slightly on yoy basis
519 545 544 533 555 564 513 519 530 532 529 539 544 567
600 15.0%
400 10.0%
200 5.0%
- 0.0%
(200) -5.0%
(400) -10.0%

Dec'15

Dec'16

Dec'17
Mar'16

Mar'17

Mar'18
Jun'15

Jun'17

Jun'18
Sep'15

June'16

Sep'16

Sep'17

Sep'18
US$ revenues from top 10 clients YoY growth, %
Source: Company, Emkay Research

 EBIT margin at 23.7% remained flat on a qoq basis due to wage hikes (15% of Sr. level
employees got hikes effective Jul’18), increased variable pay and compensation to curb
high attrition, and increase in sub-contractor expenses (overall 150bps negative impact)
despite significant currency tailwinds (+80bps) and pricing improvement (+70bps). On
future margin levers, management stated that with the increase in Digital contribution
(~200bps higher gross margin business), improvement in productivity of the FP projects
and onsite pyramid rationalization, margins can remain in the guided range despite planned
investments.
 Increase in sub-contractor costs: Sub-contractor expenses stood at 7.4% sales in
Q2FY19 vs. 6.7% in Q1FY19. Infosys stated that with its increasing focus on localization
and greater onsite demand for Digital work, sub-contractor expenses are expected to
remain elevated at current levels.
 HR metrics: ~19,700 employees were added on a gross basis. Total headcount stood at
~218,000 (up ~4.0% qoq). The utilization rate remains stretched at 85.6%.

Exhibit 7: Utilisations stretched

84.7%

84.9%

84.7%

85.7%

85.6%
84.0%
88.0%
82.5%

82.0%
81.9%

86.0%
81.3%

80.6%

80.5%
80.2%

80.1%

84.0%
82.0%
80.0%
78.0%
76.0%
June'16
Mar'16

Mar'17

Mar'18
Dec'17
Jun'15

Sep'15

Dec'15

Dec'16

Jun'17

Jun'18
Sep'16

Sep'17

Sep'18
Utilization excluding trainees

Source: Company, Emkay Research

Exhibit 8: Employee additions quarterly trends - Gross and Net

25
19.7
20 17.6 17.7
14.0 13.3 12.7 12.6
15 11.9 12.3
9.1 9.1 10.5
8.5 9.0 8.6
10 5.4 7.8
5.8
3.3 2.8 3.3
5 0.7 3.0 2.4
0.6
0
-0.1 -0.1
-5 -1.8
Mar'16

Mar'17

Mar'18
Jun'17
Jun'15

Sep'15

Dec'15

June'16

Sep'16

Dec'16

Sep'17

Dec'17

Jun'18

Sep'18

Gross Additions ('000) Net Additions ('000)

Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 4

 Infosys (INFO IN) India Equity Research | Result Update

 Attrition: Infosys acknowledged an increase in its attrition (stated to be largely led by

employees with 3-5 years of experience). It stated that it has rewarded good candidates
with promotions and compensation increases to curb high attritions. However, no signal of
pullback of such investments was provided, which, we believe, will continue to exert
pressure on margins. Higher attrition has also led to more gross additions than usual.

Exhibit 9: Attrition alarming

24 23.0
22.2
21.0 21.0 21.4
22
19.9 20.0
19.2 19.5
20 18.4 18.7
18.1
17.3 17.1
18

16

14

Mar'16

Mar'17

Mar'18
June'16

Dec'17
Jun'15

Sep'15

Dec'15

Sep'16

Dec'16

Jun'17

Sep'17

Jun'18

Sep'18
Attrition % (Consolidated)

Source: Company, Emkay Research

Other Key Highlights

 The company issued ~2.2bn additional equity shares (face value- Rs5) each during
Q2FY19 related to bonus issue. The bonus shares were issued to celebrate its 25th year
of public listing in India and to further increase the liquidity of its shares. Bonus share of
one equity share for every equity share held, and a bonus issue, viz., a stock dividend of
one American Depositary Share (ADS) for every ADS held, respectively, has been allotted.
 Acquisitions: during Q2FY19, Infosys acquired a 60% stake in Singapore-based IT services
company Trusted Source for a total consideration of up to SGD 12mn (~Rs630mn).
 On October 11, 2018, Infosys acquired 100% interest in Fluido, a Nordic-based salesforce
advisor and consulting partner in cloud consulting, implementation and training services for
a total consideration of up to EUR65mn (~Rs5.5bn), comprising a cash consideration of
EUR45mn (~Rs3.8bn), contingent consideration of up to EUR12mn (~Rs1.0bn), and
retention payouts of up to EUR8mn (~0.7bn), payable to the employees of Fluido over the
next three years, subject to their continuous employment with the group.
 Capital payouts: For FY19, it has already distributed US$400mn as special dividend and
balance (US$1.6bn) will be paid in a manner yet to be decided by its board. Infosys declared
an interim dividend of Rs7/share.
 Utilization remains stretched at 85.6% in Q2FY19 vs. 85.7% in Q1FY19.
 Onsite mix at 28.4% decreased further in this quarter (vs. 28.6% in Q1FY19 and now lowest
in the last 15 quarters).

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 5

 Infosys (INFO IN) India Equity Research | Result Update

Valuation/PE performance
Our FY19 revenue outlook improves slightly on the back of good Q2, our earnings estimates
remain flat due to the uninspiring commentary on margin improvement. We believe that our lower
multiple for Infosys is justified (14x vs. 21x for TCS) given the growth differential of ~30% and
the expected decline (-100bps) in margins for Infosys vs. margin improvement (100-150bps) for
TCS. Maintain Sell rating, with a TP of Rs580 (based on Sep’20E EPS).

Exhibit 10: 5-Yr Historical 1-Yr fwd PE chart Exhibit 11: 3-Yr Historical 1-Yr fwd PE chart

20 20
18 18
16 16
14 14
12 12
10 10
Jan-14

Jan-15

Jan-16

Jan-17

Jan-18
Jul-14

Jul-15

Jul-16

Jul-17

Jul-18
Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Oct-18

Jul-16

Jul-17

Jul-18
Jan-16

Jan-17

Jan-18
Oct-15

Apr-17
Apr-16

Oct-16

Oct-17

Apr-18

Oct-18
5 Yr Mean Plus1SD Minus1SD 1yr fwd PE 3 Yr Mean Plus1SD Minus1SD 1yr fwd PE

Source: Company, Emkay Research Source: Company, Emkay Research

Exhibit 12: Infosys’ 1-Yr forward PE discount to TCS (%)

10

-10

-20

-30

-40
Jul-14

Jul-15

Jul-16

Jul-17

Jul-18
Jan-14

Jan-15

Jan-16

Jan-17

Jan-18
Oct-13

Apr-14

Oct-14

Apr-15

Oct-15

Apr-16

Oct-16

Apr-17

Oct-17

Apr-18

Oct-18
Infosys 1-Yr fwd PE discount to TCS (%) -25%
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 6

 Infosys (INFO IN) India Equity Research | Result Update

Key Financials (Consolidated)

Income Statement
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
Revenue 684,840 705,220 819,677 905,639 969,460
Expenditure 498,800 515,972 608,719 672,662 720,062
EBITDA 186,040 189,248 210,958 232,977 249,398
Depreciation 17,030 17,768 20,790 23,057 24,680
EBIT 169,010 171,480 190,168 209,921 224,718
Other Income 30,800 31,220 24,721 26,447 26,914
Interest expenses 0 0 0 0 0
PBT 199,810 202,700 214,890 236,368 251,632
Tax 55,980 56,730 57,827 62,637 66,682
Extraordinary Items 0 14,320 0 0 0
Minority Int./Income from Assoc. 300 0 0 0 0
Reported Net Income 143,530 160,290 157,063 173,731 184,949
Adjusted PAT 143,530 145,970 157,063 173,731 184,949

Balance Sheet
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
Equity share capital 11,440 10,880 21,760 21,760 21,760
Reserves & surplus 678,380 638,360 695,761 778,099 871,655
Net worth 689,820 649,240 717,521 799,859 893,415
Minority Interest 0 0 0 0 0
Loan Funds 3,600 8,610 8,610 8,610 8,610
Net deferred tax liability 0 0 0 0 0
Total Liabilities 693,420 657,850 726,131 808,469 902,025
Net block 214,940 241,170 267,670 296,670 325,670
Investment 167,610 142,390 160,390 182,390 204,390
Current Assets 437,350 415,340 457,621 511,958 577,513
Cash & bank balance 226,250 198,180 192,239 191,412 201,803
Other Current Assets 87,880 43,130 63,852 90,516 117,180
Current liabilities & Provision 140,130 141,050 159,550 182,549 205,548
Net current assets 297,220 274,290 298,071 329,409 371,965
Misc. exp 0 0 0 0 0
Total Assets 693,420 657,850 726,131 808,469 902,025

Cash Flow
Y/E Mar (Rs mn) FY17 FY18 FY19E FY20E FY21E
PBT (Ex-Other income) (NI+Dep) 169,010 171,480 190,168 209,921 224,718
Other Non-Cash items 0 0 0 0 0
Chg in working cap (16,470) (5,140) (29,722) (32,165) (32,165)
Operating Cashflow 113,590 127,378 123,410 138,175 150,551
Capital expenditure (88,230) (12,580) (26,500) (29,000) (29,000)
Free Cash Flow 25,360 114,798 96,910 109,175 121,551
Investments (76,130) 25,220 (18,000) (22,000) (22,000)
Other Investing Cash Flow 0 0 0 0 0
Investing Cashflow (133,560) 43,860 (19,779) (24,553) (24,086)
Equity Capital Raised 0 (560) 10,880 0 0
Loans Taken / (Repaid) 3,600 5,010 0 0 0
Dividend paid (incl tax) (70,699) (113,587) (88,781) (91,392) (91,392)
Other Financing Cash Flow (13,651) (90,171) (31,672) (23,057) (24,681)
Financing Cashflow (80,750) (199,308) (109,573) (114,449) (116,073)
Net chg in cash (100,720) (28,070) (5,942) (827) 10,392
Opening cash position 326,970 226,250 198,180 192,239 191,412
Closing cash position 226,250 198,180 192,238 191,412 201,803
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 7

 Infosys (INFO IN) India Equity Research | Result Update

Key Ratios
Profitability (%) FY17 FY18 FY19E FY20E FY21E
EBITDA Margin 27.2 26.8 25.7 25.7 25.7
EBIT Margin 24.7 24.3 23.2 23.2 23.2
Effective Tax Rate 28.0 28.0 26.9 26.5 26.5
Net Margin 21.0 20.7 19.2 19.2 19.1
ROCE 30.6 30.0 31.1 30.8 29.4
ROE 22.0 21.8 23.0 22.9 21.8
RoIC 71.7 56.9 55.1 51.9 48.3

Per Share Data (Rs) FY17 FY18 FY19E FY20E FY21E

EPS 31.3 33.5 36.1 39.9 42.5
CEPS 35.1 37.6 40.9 45.2 48.2
BVPS 150.6 149.2 164.9 183.8 205.3
DPS 12.9 21.8 17.0 17.5 17.5

Valuations (x) FY17 FY18 FY19E FY20E FY21E

PER 22.2 20.7 19.3 17.4 16.4
P/CEPS 19.8 18.5 17.0 15.4 14.4
P/BV 4.6 4.7 4.2 3.8 3.4
EV / Sales 4.3 4.0 3.5 3.1 2.9
EV / EBITDA 15.9 15.0 13.5 12.2 11.4
Dividend Yield (%) 1.9 3.1 2.4 2.5 2.5

Gearing Ratio (x) FY17 FY18 FY19E FY20E FY21E

Net Debt/ Equity (0.3) (0.3) (0.3) (0.2) (0.2)
Net Debt/EBIDTA (1.2) (1.0) (0.9) (0.8) (0.8)
Working Cap Cycle (days) 37.8 39.4 47.1 55.6 64.1

Growth (%) FY17 FY18 FY19E FY20E FY21E

Revenue 9.7 3.0 16.2 10.5 7.0
EBITDA 8.9 1.7 11.5 10.4 7.0
EBIT 8.2 1.5 10.9 10.4 7.0
PAT 6.4 11.7 (2.0) 10.6 6.5

Quarterly (Rs mn) Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19

Revenue 175,670 177,940 180,830 191,280 206,090
EBITDA 42,460 43,190 44,720 45,370 48,940
EBITDA Margin (%) 24.2 24.3 24.7 23.7 23.7
PAT 37,260 36,970 36,900 36,120 41,100
EPS (Rs) 8.6 8.5 8.5 8.3 9.5
Source: Company, Emkay Research

Shareholding Pattern (%) Dec-17 Mar-18 Jun-18 Sep-18

Promoters 12.9 12.9 12.9 12.8
FIIs 35.0 35.2 34.9 35.1
DIIs 21.8 21.6 22.5 22.1
Public and Others 30.3 30.3 29.7 30.0
Source: Capitaline

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 8

 Infosys (INFO IN) India Equity Research | Result Update

RECOMMENDATION HISTORY TABLE RECOMMENDATION HISTORY CHART

Closing Period
Date TP Rating Analyst BUY Hold Sell
Price (months) Accumulate Reduce Price
Target Price
5-Oct-18 725 550 12m Sell Rahul Jain 750
18-Aug-18 715 520 12m Sell Rahul Jain
686
13-Jul-18 659 520 12m Sell Rahul Jain
622
10-Jul-18 651 520 12m Sell Rahul Jain
558
6-Jul-18 642 520 12m Sell Rahul Jain
13-Apr-18 586 485 12m Reduce Rahul Jain 494

5-Apr-18 574 485 12m Reduce Rahul Jain 430

8-Oct-18
16-Apr-16

13-Apr-17

10-Apr-18
18-Oct-15

14-Oct-16

11-Oct-17
28-Mar-18 566 485 12m Reduce Rahul Jain
12-Jan-18 539 485 12m Reduce Rahul Jain
8-Jan-18 518 475 12m Hold Rahul Jain Source: Bloomberg, Company, Emkay Research
4-Dec-17 493 470 12m Hold Rahul Jain
24-Oct-17 463 470 12m Hold Rahul Jain
4-Oct-17 450 480 12m Hold Rahul Jain
20-Sep-17 456 475 12m Hold Rahul Jain
18-Aug-17 462 455 12m Reduce Rahul Jain
14-Jul-17 486 490 12m Hold Rahul Jain
10-Jul-17 479 500 12m Accumulate Manik Taneja
13-Apr-17 466 500 12m Accumulate Manik Taneja
13-Jan-17 488 540 12m Accumulate Manik Taneja
1-Nov-16 495 540 12m Accumulate Manik Taneja
14-Oct-16 514 550 12m Hold Manik Taneja
29-Aug-16 511 550 12m Hold Manik Taneja
16-Aug-16 526 580 12m Hold Manik Taneja
18-Jul-16 541 580 12m Hold Manik Taneja
21-Jun-16 603 620 12m Hold Manik Taneja
15-Apr-16 586 620 12m Hold Manik Taneja
15-Jan-16 570 610 12m Hold Manik Taneja
4-Jan-16 539 600 12m Hold Manik Taneja
5-Nov-15 561 600 12m Hold Manik Taneja
Source: Company, Emkay Research

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018 | 9

 Infosys (INFO IN) India Equity Research | Result Update

Emkay Rating Distribution

BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.
ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.
HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.
REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.
SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.

Completed Date: 17 Oct 2018 02:01:31 (SGT)

Dissemination Date: 17 Oct 2018 02:02:31 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

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 Infosys (INFO IN) India Equity Research | Result Update

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1
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ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018| 11

 Infosys (INFO IN) India Equity Research | Result Update

COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL):

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 Infosys (INFO IN) India Equity Research | Result Update

COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY DBS BANK LTD AS DISTRIBUTOR OF THE RESEARCH REPORT
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ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018| 13

 Infosys (INFO IN) India Equity Research | Result Update

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Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018| 14

 Infosys (INFO IN) India Equity Research | Result Update

Rahul Jain, BCOM, CFA (ICFAI)

rahul.jain@emkayglobal.com
+91-022-266121253

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the
last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: ANISH MATHEW SA: DHANANJAY SINHA October 16, 2018| 15