Rama Krishna Vadlamudi, HYDERABAD

13 October 2011

www.ramakrishnavadlamudi.blogspot.com “Under promise and over achieve,” is the corporate mantra of Infosys Limited, the second largest IT services company in India. The company has stuck to its mantra by posting results higher than its guidance during the second quarter of July-September 2011. The pleasant surprise from the company has boosted the share price by about seven per cent on 12 October 2011, the day the quarterly were declared. Of course, the performance is aided in part by the favourable exchange rate between dollar and Indian rupee. The stock is expected to give decent returns to investors. The second quarter results are much better than the market expectations and are given below:
Sep.11 Rs Crore Sales Net Profit 8 099 1 906 Jun.11 Rs Crore 7 485 1 722 % Rise Sep.10 Rs Crore 6 947 1 737 % Rise

8.2 10.7

16.6 9.7

The highlights of the July-September Quarter Results are:  Sales have gone up by 8.2% on a sequential basis and 16.6% on year-on-year basis  Net profit has grown by 10.7% on a sequential basis and 9.7% yo-y basis  In constant currency terms, the revenue growth is five per cent  The company has added 45 new clients during the 2nd quarter  Operating margin has improved to 28% from 26.1%  The rupee depreciation against the dollar of 10 per cent in the last two months has helped the company partly in posting good performance

 Company is facing tough times due to high unemployment in the

US though it is not seeing any project cancellations  Sixty-five per cent of the total business is from the US  Cash & cash equivalents are Rs 18,536 crore as on 30Sep2011  Total employees are 1,41,822 as on 30Sep2011

Higher guidance
For the full year 2011-12, the management has hiked its revenue guidance in rupee terms to Rs.33,501-Rs.34,088 crore, as against its previous guidance of Rs.31,777-32,311 crore, indicating a growth of 21.8-24.0 per cent year-on-year, as against its earlier guided growth of 15.5-17.5 per cent year-on-year. The management has also raised its EPS (earnings per share) guidance to Rs.143.02-145.26, as against its previous guidance of Rs.128.20-130.08, showing an increase of 19.7-21.6 per cent y-o-y, as against its earlier guided growth of 7.3-8.9 per cent y-o-y.

The current market price of the stock is Rs 2,700 as the close of 13 October 2011 when the Sensex closed for the day at 16,884 and Nifty at 5,078. The forward P/E for FY2011-12 ratio works out to 18.60. Though the company is cautious about the uncertain global environment, investors can bank on the blue chip company’s share while keeping a close watch on the dollar-rupee exchange rate and global developments. The company is strongly placed to weather the global head winds and is expected to provide decent returns. The current performance trend of the company indicates that it will get revenue boost from large orders going forward. The company’s margins too are likely to improve in the next few quarters due partly to the rupee depreciation against the dollar. --Note on author: Author is an investment analyst and writer. The views are personal and this is written only for information purpose. The author has a vested interest in the stock markets. Readers are advised to consult their certified financial adviser before taking any investment decisions.

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