Infosys EBITDA surged on 17.2% and EBITDA Margin showed almost no change

15-04-2016 • About Infosys ($INFY) • By InTwits

Infosys reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:

Infosys is a fast growth stock: FY2016 revenue growth was 17.1%, 5 year revenue CAGR was 17.8% at FY2016 ROIC 25.3%
Infosys has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.8%. At the same time it's a lot of higher than industry average of 3.6%.
CAPEX is quite volatile: ₹3,202m in FY2016, ₹1,813m in FY2015, ₹2,841m in FY2014, ₹1,695m in FY2013, ₹1,434m in FY2012
The company has highly profitable business model: ROIC is 25.3%

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Infosys's Revenue surged on 17.1%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 2.5 pp from 39.5% to 37.0% in FY2016. During the last 5 years EBITDA Margin bottomed in FY2014 at 26.3% and was growing since that time.

Gross Margin decreased slightly on 0.94 pp from 38.3% to 37.4% in FY2016. SG&A as a % of Revenue showed almost no change in FY2016.

Net Income margin decreased slightly on 1.5 pp from 23.1% to 21.6% in FY2016.

Investments (CAPEX, working capital and M&A)

Infosys's CAPEX/Revenue was 4.4% in FY2016. The company's CAPEX/Revenue decreased slightly on 0.83 pp from 5.2% in FY2013 to 4.4% in FY2016. Average CAPEX/Revenue for the last three years was 4.7%.

Return on investment

The company operates at high and attractive ROIC (25.3%) and ROE (23.2%). ROIC showed almost no change in FY2016. ROE decreased slightly on 0.95 pp from 24.1% to 23.2% in FY2016. ROIC followed a declining trend at -1.8 pp per annum in the last 5 years. ROE stuck to a declining trend at -1.2 pp per annum in FY2012-FY2016.

Leverage (Debt)

The company has no debt. Cash increased on 7.7%.

Management team

Infosys's CEO Vishal Sikka has spent 6 years with the company.

Financial and operational results

Infosys ($INFY) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	337,340	403,520	501,330	533,190	624,410	17.1%
Gross Profit	139,260	395,750	179,920	204,360	233,430	14.2%
SG&A	41,470	19,650	59,510	66,040	77,230	16.9%
EBITDA	106,640	112,770	131,850	144,260	169,100	17.2%
Net Income	83,160	94,290	106,480	123,290	134,910	9.4%
Balance Sheet
Cash	205,910	218,320	259,500	303,670	326,970	7.7%
Short Term Debt	0	0	0	0	0
Long Term Debt	0	0	0	0	0
Cash flow
Capex	16,410	20,950	27,450	22,470	27,230	21.2%
Ratios
Revenue growth	22.7%	19.6%	24.2%	6.4%	17.1%
EBITDA growth	19.5%	5.7%	16.9%	9.4%	17.2%

Gross Margin	41.3%	98.1%	35.9%	38.3%	37.4%	-0.9%
EBITDA Margin	31.6%	27.9%	26.3%	27.1%	27.1%	0.0%
SG&A, % of revenue	12.3%	4.9%	11.9%	12.4%	12.4%	-0.0%
Net Income Margin	24.7%	23.4%	21.2%	23.1%	21.6%	-1.5%
CAPEX, % of revenue	4.9%	5.2%	5.5%	4.2%	4.4%	0.1%

ROIC	32.4%	28.3%	27.2%	25.1%	25.3%	0.2%
ROE	28.0%	26.4%	24.9%	24.1%	23.2%	-1.0%
Net Debt/EBITDA	-1.9x	-1.9x	-2.0x	-2.1x	-1.9x	0.2x

Peers in IT Consulting & Software

Below we provide Infosys benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	9.3%	7.3%	9.9%	37.0%	-
Cyient ($CYIENT)	30.7%	20.6%	17.8%	24.0%	-
Empower India ($EMPOWER)	-3.7%	-13.2%	-32.6%	23.9%	-
Hexaware Technologies ($HEXAWARE)	34.3%	17.3%	13.0%	21.0%	-
Tech Mahindra ($TECHM)	6.8%	25.2%	174.0%	20.1%	-
Median (22 companies)	23.1%	20.6%	13.5%	9.1%	-2.6%
Infosys ($INFY)	-	19.6%	24.2%	6.4%	17.1%

Top companies by Gross margin, %


Top	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	-	-	47.4%	42.4%	-
Mindtree ($MINDTREE)	31.5%	36.2%	-	34.8%	-
Wipro ($WIPRO)	29.2%	30.4%	32.0%	31.6%	-
Median (3 companies)	31.5%	33.3%	39.7%	34.8%	-
Infosys ($INFY)	41.3%	98.1%	35.9%	38.3%	37.4%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Oracle Financial Services Software ($OFSS)	35.3%	35.2%	37.4%	39.7%	-
Tata Consultancy Services ($TCS)	29.5%	28.6%	30.7%	26.1%	-
Wipro ($WIPRO)	19.1%	20.9%	22.4%	22.3%	-
Mindtree ($MINDTREE)	15.1%	19.8%	20.6%	20.3%	-
Sqs India Bfsi ($SQSBFSI)	10.6%	18.8%	20.5%	19.4%	-
Median (25 companies)	15.1%	16.5%	18.3%	12.3%	-53.0%
Infosys ($INFY)	31.6%	27.9%	26.3%	27.1%	27.1%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Ramco Systems ($RAMCOSYS)	-	22.1%	15.3%	12.4%	-
Niit Technologies ($NIITTECH)	5.9%	4.6%	6.1%	7.9%	-
Financial Technologies (India) ($FINANTECH)	8.9%	11.4%	-	6.5%	5.4%
Mindtree ($MINDTREE)	2.5%	4.5%	5.0%	5.6%	-
Tech Mahindra ($TECHM)	5.4%	2.6%	5.0%	5.0%	-
Median (20 companies)	3.7%	3.2%	2.6%	3.1%	5.4%
Infosys ($INFY)	4.9%	5.2%	5.5%	4.2%	4.4%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tata Consultancy Services ($TCS)	48.6%	48.4%	50.2%	40.5%	-
Hexaware Technologies ($HEXAWARE)	33.5%	39.2%	34.7%	35.7%	-
Mindtree ($MINDTREE)	24.9%	34.6%	36.2%	32.0%	-
Sqs India Bfsi ($SQSBFSI)	12.1%	27.0%	29.4%	30.6%	-
Tech Mahindra ($TECHM)	15.4%	20.1%	43.0%	29.7%	-
Median (30 companies)	19.1%	20.4%	22.9%	20.6%	-7.4%
Infosys ($INFY)	32.4%	28.3%	27.2%	25.1%	25.3%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
3I Infotech ($3IINFOTECH)	8.5x	20.3x	27.7x	14.7x	-
Ramco Systems ($RAMCOSYS)	8.8x	-	27.6x	4.2x	-
Onward Technologies ($ONWARDTEC)	2.4x	2.2x	4.1x	1.9x	-
Kpit Technologies ($KPIT)	0.3x	0.5x	0.7x	0.4x	-
Mphasis ($MPHASIS)	-0.1x	0.2x	-	0.2x	-
Median (23 companies)	-0.0x	-0.2x	-0.2x	-0.2x	0.0x
Infosys ($INFY)	-1.9x	-1.9x	-2.0x	-2.1x	-1.9x

Infosys stock price chart

Infosys financials

mln.	FY2010	FY2011	FY2012

Revenue	227,420	275,010	337,340
EBITDA	78,220	89,260	106,640
Net income	62,190	68,350	83,160
CAPEX	8,470	13,050	16,410
Debt	0.000	0.000	0.000
Cash	121,110	166,660	205,910

About Infosys

Infosys Limited provides business consulting, technology, engineering, and outsourcing services worldwide. Its solutions include business IT services comprising application development and maintenance, independent validation services, infrastructure management, business process management, and engineering services consisting of product engineering and life cycle solutions; and consulting and systems integration services, including consulting, enterprise solutions, systems integration, and advanced technologies. Its solutions also comprise products, platforms, and solutions under the Infosys Edge brand to cater the next generation market needs driven by global trends, including digital consumers, digital marketing, emerging economies, distributive trade, and enterprise buying; and banking software products to address the core banking, e-banking, mobile banking, CRM, payments, treasury, origination, liquidity management, wealth management, and Islamic banking requirements of retail, corporate, and universal banks worldwide. In addition, the company offers cloud and IT transformation services, such as cloud-based transformation, Big Data, and workplace transformation; and enterprise mobility services and solutions, including consulting services, business solutions, technology solutions, and services. It serves clients in financial services and insurance; manufacturing; energy, communications and services; resources and utilities; retail, consumer packaged goods and logistics; life sciences; and healthcare and growth markets. The company was formerly known as Infosys Technologies Limited and changed its name to Infosys Limited in June 2011. Infosys Limited was founded in 1981 and is headquartered in Bengaluru, India.