Infotech Enterprises - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Infotech Enterprises (Infotech) reported a weak set of results on the operating front. The company witnessed challenges in two of its top 10 client accounts. The Management sounded confident of FY2014 turning out to be a better year than FY2013 and plans to hire ~2,500 gross employees with ~15% planned attrition. We maintain our Accumulate rating on the stock.

Quarterly highlights: For 4QFY2013, Infotech reported a revenue of US$85.9mn, down 1.9% qoq, majorly impacted by ramp downs seen in a couple of customer accounts in the America geography - one in heavy engineering and one in hi-tech industry verticals. In INR terms, the revenue came in at Rs. 464cr, down 2.2% qoq. The EBITDA and EBIT margins declined by 151bp and 232bp qoq to 17.0% and 12.8%, respectively, due to muted volume growth and inch up in employee costs on account of the gross addition of 783 employees into the system. The PAT came in at Rs. 54cr, down 12.3% qoq, impacted by lower other income of Rs. 10cr as against Rs. 16 in 3QFY2013.

Outlook and valuation: The Management sounded confident of FY2014 turning out to be a better year than FY2013. For FY2014, in the ENGG vertical, the Management indicated at a robust deal pipeline in the aerospace business, and is seeing strong signs of growth in the transportation business segment owing to recovery in the transportation industry. Further, the Management cited that it is seeing initial signs of recovery in the hi-tech business segment while heavy engineering is still looking soft. In the UT&C vertical, for FY2014, the Management indicated at a strong pipeline for the utilities business segment; in the telecom business segment, it expects business to remain stable with growth lower than the company's average growth rate. Over FY2013-15, we expect the company to post a USD and INR revenue CAGR of 8.0% and 7.7%, respectively. We value the company at 8.5x FY2015E EPS of Rs. 21.9, which gives us a target price of Rs. 185; we maintain our Accumulate view on the stock.

Source : Equity Bulls

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