Infotech Enterprises - 3QFY2014 Result Update - Angel Broking

Infotech Enterprises (Infotech) reported a strong set of results on the revenue as well as the operating front but its bottom-line disappointed a bit due to forex losses. Growth trajectory resumed for the company after four quarters of flat business with all the four business units posting more than 3% sequential growth in dollar terms. The Management indicated that the challenges seen earlier in few of its large client accounts are behind and is confident of the company maintaining revenue traction in the next year with a healthy deal pipeline visibility across all services offerings to sustain the growth momentum. We maintain our Neutral rating on the stock.

Quarterly highlights: For 3QFY2014, Infotech reported a revenue of US$93.3mn, up 6.5% qoq. In constant currency terms, the revenue grew by 5.7% qoq. In INR terms, the revenue came in at Rs. 578cr, up 5.3% qoq. The EBITDA margin of the company declined marginally by 16bp qoq to 19.6%. The PAT came in at Rs. 69cr, down 4.3% qoq, impacted by loss at other income level of Rs. 5.8cr as against a gain of Rs. 8.3cr in 2QFY2014.

Outlook and valuation: The company has been making investments to strengthen its product portfolio, and taking initiatives to improve its financial metrics. For FY2014, in the ENGG vertical, the Management indicated that the company sees a good deal pipeline in the aerospace business segment with new customer programs starting in 2HFY2014. The Management cited that it is seeing initial signs of recovery in the hi-tech business segment with stability coming in the top three customers. It indicated at a strong pipeline for the utilities business segment and expects business to remain stable in the telecom business segment. The Management cited that the company is witnessing good traction in the content & geospatial business area. Over FY2013-15E, we expect the company to post a USD and INR revenue CAGR of 9.4% and 16.9%, respectively. We expect the EBITDA margin of the company to remain in a narrow range and expect a CAGR of 19.6% and 18.3% in EBITDA and PAT respectively. Owing to the recent sharp run-up in the stock price, we maintain our Neutral rating on the stock.

Source : Equity Bulls

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