Stock Market and performance (Infosys) By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

April 22, 2016 | Posted by bobbysrinivasan << back to blog

It is the time of the year when the results of corporate performance for the period ended March 31, 2016 will be announced. Early announcements are very encouraging. In the last the two days both Infosys and TCS came with their announcement. First let us look at the data for Infosys,

	FY 16	FY 15	% Change
	(in Crores)		% Change
Turnover	62441	53319	17.1%
Gross Profit	23341	20436	14.2%
Net Profit	13491	12329	9.4%
Operating Profit	15620	13832	16.5%
EPS (in Rs.)	59.02	53.94	9.4%

These are the following observations,

The turnover of the company has gone up to 17.1%. This is highly encouraging given there is a global slowdown.

The gross profit before all expenses has increased by 14.2%. This is almost consistent with the revenue growth rate.

The net profit has increased by 9.4%. The net profit as a proportion of turnover is down a bit but not significant.

Net Profit		12329	= 23.12%
Turnover FY 15		53319	= 23.12%

Net Profit		13491	= 21.60%
Turnover FY 16		62441	= 21.60%

A decline in the net profit over turnover which is noticed could be due to wage hike of 6 to 12% for the offsite employees while the onsite employees got a 2% wage hike.

Earnings per share has jumped by 9.4% .

The operating margin is around 25.5% which is good.

The company has given guidance for future turnover growth of 11.8 – 13.8%. Generally the company is conservative in their guidance.

The company expects the operating margin of 24-26%. The revenue contribution from the US had dropped 0.6% points to 61.9% while the Indian business grew 3% as against the previous quarter.

Student: Professor, I notice all your analysis. The company is on solid footing. The company has declared Rs.14.25 as final dividend for the financial year. Should I buy this share for my portfolio?

Professor: The company share is currently trading 1237 Rs up 64 Rupees since yesterday. The earnings for the FY 17 will be around 65-67 rupees. At a PE of 18, we can expect the price to be around 1200. So enter the market when there is a small correction namely to around 1100 Rs. The future looks good with a minimum average return of 12% including the dividend. So buy the stock.

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