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Research
Infotech Enterprises - 1QFY2013 Result Update - Angel Broking
Posted On : 2012-07-22 00:25:09( TIMEZONE : IST )
For 1QFY2013, Infotech Enterprises (Infotech) reported a decent set of results, with overall volume growth of 2.0%. The utilities, telecom and content (UT&C) vertical witnessed robust volume growth of 5.8% qoq. In engineering manufacturing and industrial products (ENGG) vertical, aerospace segment witnessed volume growth of 2.5% while volumes from home, transportation, hi-tech (HTH) declined by 2.6% qoq. The company added 17 new clients during the quarter. We maintain our Neutral view on the stock.
Quarterly highlights: For 1QFY2013, Infotech reported revenue of US$84mn, up 1.4% qoq, on the back of 2.0% qoq volume growth. In INR terms, revenue came in at Rs.456cr, up 9.4% qoq. The company's EBITDA margin declined by 115bp qoq to 18.7%, largely because of wage hikes given during the quarter which impacted the margins by ~370bp qoq. This negative effect was partially absorbed by ~290bp qoq positive impact derived from INR depreciation.
Outlook and valuation: Management indicated that the company is expected to grow 14% plus in constant currency terms during FY2013, revised downwards from earlier stated 19% plus. The company is on the right track in terms of making investments to strengthen its product portfolio and is taking initiatives to improve its financial metrics. The company has got price increase from some of its selective clients, which instills confidence in the company's performance going ahead. So, over FY2012-14E, we expect the company to post a USD and INR revenue CAGR of 10.8% and 15.3%, respectively. Infotech was previously consistently underperforming on the operating margin front, which the company is now focused to address by levers such as improving utilization level, rationalizing SG&A expenses and shifting more work offshore. We expect EBITDA and PAT CAGR to be at 15.6% and 15.7%, respectively, over FY2012-14E. We value the company at 9.5x FY2014E EPS of Rs.19.7, which gives us a target price of Rs.187, and maintain Neutral view on the stock.
