Infosys net better than estimate, stock up with a vengeance

Infosys today reported better-than-expected earnings for the first quarter of the current financial year and also flagged off expectations that things may be improving for the IT major as it maintained its dollar revenue guidance for the year.

Reacting to the results, shares of the company surged 15 percent in opening trade.

The company said its consolidated net profit for the quarter stood at Rs 2,374 crore as against a CNBC-TV18 poll expectation of Rs 2,315 crore. Its rupee revenue of Rs 11,267 crore was also higher than the poll estimate of Rs 11,029 crore.

The company said it expected rupee revenue growth for the year at 13-17 percent and kept its dollar revenue guidance unchanged at 6-10 percent.

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Even the profit margins came in at 23.64 percent, better than the expected 23.23 percent.

However, the company has expressed concerns that the wage hikes affected in the current quarter may adversely impact its margins going forward.

“Despite facing an uncertain macro environment, changing regulatory regime and a volatile currency environment, we have done well in Q1 and are cautiously optimistic about rest of the year,” said SD Shibulal, CEO and Managing Director.

“We maintained our margins and continued making investments in the business,” said Rajiv Bansal, Chief Financial Officer. “We have announced compensation increases for FY 14 effective July which will affect our margins in the future quarters.”

Market expert Dipan Mehta told CNBC-TV18 that the market will take the numbers positively.

“It is after a long time that we are seeing a stable management at the company,” he said.

Heaving a sigh of relief, brokerages’ view for Infosys shares also improved. While CNBC-TV18 cited UBS as saying that the stock is likely to move up and recommended buying with a target of Rs 2,900 per share. Goldman Sachs, meanwhile, termed the numbers a surprise on both revenue and profit.

Highlights:

Infosys earnings per share (EPS) was up 0.8 percent quarter on quarter and 3.7 percent year-on-year at Rs 41.54

Cash and cash equivalents available for sale financial assets,and government bonds were Rs 24,078 crore versus Rs 23,958 crore in the previous quarter.

Infosys and its subsidiaries added 66 clients during the quarter. Gross addition of 10,138 employees (net addition of 575) for the quarter by Infosys and its subsidiaries. Total employee strength at the end of the quarter stood at 157,263 employees

North America contributed 61.4 percent of the revenue, Europe 23.6 percent, India 2.6 percent and rest of the world 12.4 percent.

As far as service-wise revenue break up is concerned, application maintenance contributed 19.3 percent, applications development 15.7 percent and infrastructure management services 7 percent.

Business and IT services contributed 61 percent, consulting, packaging implementation and others 33.6 percent and products, platforms and solutions 5.4 percent.

Industry-wise revenue break-up wasinsurance, banking & financial services 33.7 percent, manufacturing 22.5 percent, retail and life sciences 24.7 percent and energy, utilities, communications and services at 19.1 percent.