BUY
CMP: Rs2138
Target Price: Rs2400
* Management expects growth momentum to remain healthy in the near term on account of robust Q1FY23, healthy deal wins, and a strong deal pipeline, leading to double-digit revenue growth in FY23.
* eClerx is not facing any client-specific issues in its top clients which augurs well for growth sustainability. However, management remains watchful due to delay in decision making observed in certain pockets in recent months and overall macro uncertainties.
* Reported EBITDAM declined ~750bps QoQ to 23.3% in Q1 due to wage hikes, increase in offshore bench, and additional earnout payment for Personiv. Management expects adjusted EBITDAM to remain at the lower half of the guided range of 28-32% for the next couple of quarters due to the likely increase in travel and return-to-office costs.
* We have tweaked our FY23-FY25 EPS estimates by -3.4% to 2.4%, factoring Q1 performance and FY22 annual report. eClerx is likely to maintain steady operating performance in the near term, while uncertainties prevail over CY23 growth trajectory due to macro factors. We maintain Buy with a TP of Rs2,400 at 15x Sept'24E EPS, considering near-term demand tailwinds, steady cash generation, prudent capital allocation, and reasonable valuations.
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