Feb 14, 2013
SPA Research is bullish on Infinite Computer Solutions and has recommended buy rating on the stock with a target price of Rs 206 in its February 12, 2013 research report.
"Infinite reported better than expected Q3FY13 revenue of $67mn (SPAe: $66mn). The company saw greater traction in Healthcare business and added 10 new clients taking the total to 67. The operating margins at 16.42% were stable and above the company's FY13 guidance of 16%. This strong Q3 performance has vindicated our confidence that the company will be able to meet our FY13 revenue expectation of $262mn (higher end of its own revised guidance). Thus we continue to recommend BUY with a 15-month Target Price of INR 206 based on 5.5x FY14E earnings.
Infinite's Q3FY13 revenues of $67.1mn saw incremental revenue of $4.1mn QoQ; healthcare contributed $2.5mn (c.60%) of the incremental revenues. Pricing at onsite increased by 1.5% to $66/hour while offshore rates remained stable at $20/hour. With a new large engagement from its largest customer coming through, company saw increased traction from the US geography; which now contributes 87.4% of the topline.
Operating Margins of the company declined by 23bps to 16.42% sequentially on the back of (i) higher subcontracting costs partially offset by (ii) absence of one-time SI costs in last quarter. The company added 311 new employees in the latter half of Q3 which would put incremental pressure on margins in Q4FY13. Realizing this, the company has guided towards FY13E OPM of 16% with 9MFY13 margins of 16.62% indicating 15% margins for Q4FY13E.
The company added 10 new clients in Q3FY13. It signed a large product engineering services deal with a large electronic and industrial equipment manufacturer in US to mark its foray in product engineering business outside of telecom domain. It also signed a Prod. Engg. Deal with a large telecom OEM.
On the back of improved deal flow we remain confident that the company would clock USD revenue CAGR of 23% and operating margins of 16.30%/16.4% in FY13E/14E on the back of Non-Linear business increasing contribution partially offset by INR appreciation, resulting in an EPS CAGR of 17.43% over FY12-14E. Thus, we continue to recommend BUY with a 15-month TP of INR 206 at 5.5x FY14E earnings," says SPA Research report.