Result Analysis: Infosys Result Update Q4FY21 and FY21

Result-Analysis

Particulars (In Rs. Cr.) – Consolidated Q4FY21 Q3FY21 Q4FY20 QoQ % YoY% FY21 FY20 YoY %
Revenue from Operations 26,311 25,927 23,267 1.48% 13.08% 1,00,472 90,791 10.66%
Other Income 545 611 614 -10.80% -11.24% 2,201 2,803 -21.48%
Total Income 26856 26,538 23,881 1.20% 12.46% 1,02,673 93,594 9.70%
Employee Benefit Expenses 14440 14,097 12916 2.43% 11.80% 55,541 50,887 9.15%
Employee Benefit Exp. as % of Rev. 54.88% 54.37% 55.51% 51 bps (63) bps 55.28% 56.05% (77) bps
EBIT 6440 6589 4927 -2.26% 30.71% 24622 19374 27.09%
EBIT Margin 24.48% 25.41% 21.18% (94) bps 330bps 24.51% 21.34% 317bps
Profit After Tax 5,078 5215 4,335 -2.63% 17.14% 19,423 16,639 16.73%
PATM (%) 18.91% 19.65% 18.15% (74) bps 76 bps 18.92% 17.78% 114 bps
EPS (in Rs.) 11.96 12.25 10.19 -2.37% 17.37% 45.61 38.97 17.04%
Segment Revenue – Consolidated Q4FY21 Q3FY21 Q4FY20 QoQ % YoY% FY21 FY20 YoY%
Financial Services 8,677 8,578 7,282 1.15% 19.16% 32,583 28,625 13.83%
As % of Revenue 32.98% 33.09% 31.30% (11) bps 168 bps 32.43% 31.53% 90 bps
Retail 3,902 3,801 3,622 2.66% 7.73% 14,745 14,035 5.06%
Telecom 3,156 3,215 3,017 -1.84% 4.61% 12,628 11,984 5.37%
Energy Utilities & Resources 3,233 3,251 2,992 -0.55% 8.05% 12,539 11,736 6.84%
Manufacturing 2,533 2,416 2,363 4.84% 7.19% 9,447 9,131 3.46%
Life Sciences and Healthcare 1,796 1,827 1,484 -1.70% 21.02% 6,870 5,837 17.70%
Others & Hi Tech 3,014 2,839 2,507 6.16% 20.22% 11,660 9,443 23.48%

Result Highlights:

  • Infosys Consolidated Revenue rose 1.4% QoQ and 13% YoY to Rs 26,311 crore less than the estimated of Rs 26,510 crore, revenues in CC terms grew by 9.6% YoY and 2.0% QoQ.
  • Net profit rose 17% YoY to Rs 5078 crore (below the estimates) for the March quarter compared with Rs 5,078 crore in the same quarter last year.
  • Revenue in FY21 rose 10% YoY to Rs. 1,00,472 Crore while PAT grew 17% YoY to Rs. 19,423Crore.
  • EBIT margin of Infosys contracted by 63 bps on sequential basis in Q4FY21 to 24.5% vs 25.4% in Q3FY21 due to wage hike in Q3FY21 however margins are up 330 bps YoY.
  • EBIT margins of the company increased by 317 bps in FY21 to 24.5% from 21.34% in FY20 due to lower employee expenses and sharp decline of travel expenses.
  • Financial Services Segment Contribution to the total revenue rose to 32.4% in FY21 from 31.5% in FY20.
  • North America continues to contribute 61.6% to the company’s total revenue.
  • Large deal TCV for FY21 peaked to an all-time high of $14.1 billion including $2.1 Billion in Q4FY21 with 66% being net new. Digital revenues now contribute 51.5% to the total revenues.
  • Guided Revenue growth of 12%-14% in constant Currency and Operating margin of 22%-24% for FY22.
  • Cash Flows from Operating Activities rose 36.5% in FY21 to Rs. 23,224 Crore while Free Cash Flow increased 44.39% YoY to Rs. 37968 Crore.
  • The total dividend per share of Rs.27 for FY21 is 54% increase over FY20.
  • Attrition increased sharply from 10% in December to 15.2% in Q4FY21.
  • The company approved Final dividend of Rs 15 per share.
  • The 40th Annual General Meeting of the members of the Company will be held virtually on Saturday, June 19, 2021.

Buyback Update:

  • The Board has approved a proposal to buy back up to 52,571,428 equity shares of Infosys being 1.23% of the total paid up equity share capital, at Maximum Price of Rs 1750 per equity share through the open market route implied premium of 20 per cent from the last closing price for an aggregate amount not exceeding 9,200 crore Subject to the market price of the Equity Shares being equal to or less than the Maximum Buyback Price.
  • The Company shall utilise at least 50% of the amount earmarked as the Maximum Buyback Size for the Buyback i.e. ₹ 4,600 crore
  • This will be the third buyback announced by the company in its history. The first was a tender offer in 2017, when the company bought back shares worth Rs 13,000 crore at Rs 1,150 per share. The second buyback was conducted in 2019 when the company bought back shares worth Rs 8,260 crore at an average price of Rs 747 per share.

 

Management commentary: 

  • Commenting on the Q4 performance, Salil Parekh, Chief Executive Officer and Managing Director, said: “We have crossed a milestone of `100,000 crore in revenue in FY21. Our intense focus on client relevance, growing our digital portfolio with differentiated capabilities like Infosys Cobalt and empowering employees have helped us emerge as a preferred ‘partner-of-choice’ for our global clients. A strong momentum exiting FY21, alongside a focused strategy to accelerate client digital journeys, gives us confidence for a stronger FY22

 

  • Margins in FY21 rose due to some cost deferments like travel expenses by the company and Lower employee expenses which expected increase in FY22 with wage hike in Q2FY22 and increase in discretionary expenses due to which margins would be in the range of 22%-24% in FY22 as against 24.5% in FY21.

 

  • Employee Attrition rate is expected to remain high for the next two quarter but company thinks its various initiatives is likely to help to control it.

 

Outlook:

Infosys reported revenue and Profit growth below the Street expectation in Q4FY21 however company reported strong growth in FY21 at 10.7%. Q4FY21 numbers below the street estimates, higher attrition rate and buyback through open market with Maximum buyback price of Rs. 1750 likely to put lower pressure in share price of the company however strong guidance for FY22 and buyback will support the share price. Management guided Operating Profit margins in the range of 22%-24% below the 24.5% in FY21 due to normalization of discretionary expenses and increase in wages but still margins would be higher of FY20 Margins of 21.3%. At the CMP of Rs. 1398, Infosys is trading at PE multiple of 30.7x. Valuing the company at 26.7x FY22E EPS, we recommend Infosys to buy with any downside in the share price of the company for the Target Price of Rs.1560.

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