News / Infinite Computer: Cheaper valuations but growth should resume for a rerating
Dec 20, 2013

MUMBAI: The stock of Infinite Computer Solutions (India) has been trading in a narrow range over the past month since its second results in the middle of November. The company has guided for a deceleration in sales growth during the second half of the year following uncertainty over the ramping of some of the projects of key clients. The management is however confident that the growth will resume in FY15 together with an improvement in operating profitability.

The company expects to close FY14 with revenue of Rs 1,700-1,750 crore. It has earned over Rs 879 crore in revenue during the six months ended September 2013. This means it expects to earn just over Rs 860 crore in the second half. The company management has stated that some of the key projects ramped down in the second quarter and some more will be scaled down in the third quarter as well. It has also been conservative not to consider any incremental revenue from the new client accounts for the remaining two quarters of the current fiscal.

On the positive side, the company expects growth to resume during the next fiscal. It has invested in sales and marketing functions and product development, which are expected to fuel business growth along with higher operating margin. The company's employee attrition remained more or less stable at 16.2% during the September 2013 quarter. Another positive is that the company is not heavily dependent on H1 visas since it has over 1,500 employees in the US out of total strength of 5,170 employees. This insulates it from the uncertainty over the possible changes in the visa rules in the US.

At the Friday's close of Rs 124.8, Infinite traded at a trailing P/E of 4.6, which is on a lower side compared with the P/E range of 4-6 for small cap IT players. The company's networth of Rs 678 crore at the end of the September 2013 quarter is higher than its market cap of Rs 530 crore. This leaves a room for the stock valuation to improve provided the company delivers sustainable growth in the coming quarters.

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