CMP: Rs400 | Target Price: Rs520
■ Birlasoft's Q2FY22 operating performance was a tad better than expectations. Revenue grew 6.6% QoQ to USD136.9mn. EBITM declined 90bps QoQ to 13.1% due to salary hike, increase in subcontracting costs, investment in capabilities and higher recruitment costs.
■ Revenue growth was broad-based and was driven by the BFSI (10.3% QoQ), Lifesciences (10.3%), Manufacturing (4.7%) and E&U (2.3%) verticals. Management expects broad-based revenue growth momentum to continue in the coming quarters.
■ The company signed deals of TCV USD140mn in Q2, including net new TCV of USD104mn. Management indicated that net new ACV growth remains robust, although reported net new TCV remained flat YoY in H1. The deal pipeline grew by 50% YoY in Q2.
■ We raise our FY22E/FY23E/FY24E EPS by 0.1-1.6%, factoring in Q2 performance. We maintain Buy with a revised Sep'22 TP of Rs520 at 25x Sept'23E EPS (Rs500 earlier), on strong earnings momentum (26% EPS CAGR over FY21-24E) and reasonable valuations.