Infosys begins the earnings season with a flat guidance for FY 10

Infosys has just announced their audited consolidated results for Q4 FY 09 ( Jan-March 2009) and also for the full year FY 09

For easy reference,I have summarised the performance as below

Audited Consolidated Results of INFOSYS TECHNOLOGIES LTD

 Financial Year 2008-9 ending March 31,2009

 

Rs in Crs

FY 09

at March 31,2009

FY 08

at March 31,2008

% Up

Income

21693

16692

30

Net Profit

5988

4659

28.5

Equity ( FV Rs 5)

286

286

Reserves

17968

13509

33

Networth

18254

13795

32

 

 

 

 

Book Value in Rs

319

241

32

EPS in Rs

104.6

84.53

24

Dividend in Rs

23.5

33.25

 

Dividend in %

470

665

 

Infosys has given a flattish earnings guidance for FY 10…so this 28.5% growth in Earnings in FY 09 is unlikely to be maintained in FY 10…In fact they estimate that the EPS would drop into the range of  Rs 95.65 to Rs 101.18  

Infosys has reacted by 5% to Rs 1345…that’s a forward PE for 13 to 14

Company’s Top Management voice their caution as below

  • Expect Pricing to drop by 6.5%
  • Expect Operating Margins to drop by 3%
  • Survey of 135 Clients that contribute to 83% of Revenues revelas that 60% say that their IT Budget will drop by 10% 
  • Environment continues to be challenging
  • Utilisation rate has dropped to below 68% and will remain under pressure

Clearly Infosys is expecting  tough times ahead and is being candid about it.For a first time in many years it may actually earn less in the coming year than it did in the year just concluded…I fear if the Rupee appreciates to Rs 45,the margins will come under more pressure…Currently Infosys has hedged US $ 500 Million

Don’t expect Infosys to perform brilliantly on the bourses anytime soon…at Forward PE of 13 and 14,there is a good chance  that the share price will react by atleast 20% towards Rs 1000 

Clearly the IT Sector is not going create any magic in your portfolios this Year….even if the Rupee sinks to Rs 55 and beyond,clients would leverage for further price cuts

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