Infosys has gained over 5% post its second quarter FY 2013-14 results on the back of the company performing in line with the market expectation. The company has increased its FY 2013-14 revenue guidance from 6%-10% range to 9%-10% range. Infosys has a weight of 10% in our Nifty Stock portfolio.
Infosys management is now showing aggression and are talking about volumes rather than margins. However the company is seeing management churn with top level exits and the rise of the founder’s son to higher positions. We had replaced Infosys with Wipro in our 19 stock portfolio for the future on our worries over the management churn. The ten Nifty stock portfolio will continue to hold Infosys as it is a buy and hold portfolio for one year. We will revisit this portfolio in January 2014.
Infosys reported a 1.6% increase in the consolidated net profit to Rs.2401 crores from Rs.2369 crores on a year on year basis and an increase of 1.39% from Rs.2374 crores on a sequential quarter on quarter basis. The net profit margin declined in Q2FY14 over Q2FY13 due to a one time visa settlement charge of Rs.219 crores. The sales increased by 31.52% to Rs.12,965 crores from Rs.9858 crores on a year on year basis and an increase of 15.07% from Rs.11,267 crores on a sequential quarter on quarter basis. The company attributes the sales growth on a year on year basis to increase in volume growth, stable pricing and client additions. The company added 68 clients, won 5 to 6 large deals worth USD 50 million each and added 12,168 employees (gross) and 2,964 employees (net) during Q2FY14. The company declared an interim dividend of Rs.20 per share for FY 2013-14.
The dollar denominated consolidated net profit has shown a decrease of 11.1% to USD 383 million from USD 431 million on a year on year basis and a decline of 8.4% from USD 418 million on a sequential quarter on quarter basis. The dollar denominated sales increased by 15% to USD 2.066 billion from USD 1.797 billion on a year on year basis and an increase of 3.8% from USD 1.991 billion on a sequential quarter on quarter basis. The average USD/INR rate for Q2FY14 period stands at Rs.62.77 per USD compared to Rs.56.56 per USD for Q1FY14.
The rupee earnings have come in line with the expectations due to INR depreciation but the USD earnings have declined in double digits. The company has increased its full year USD revenue growth guidance from 6-10% range to 9%-10% range for FY 2013-14.
Table 1. Q2 FY14 Result Update – Infosys