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Overall, maintains consistent financial performance

Our view

Overall, the revenue and margin performance in the quarter was broadly inline with expectation. Demand environment continues to remain robust in all the operating segments of the company. It is well placed to meet its FY22 growth guidance of 19‐ 20% in USD terms. Positive operating leverage and continued focus on productivity measures should enable EBIT margin above 18%+.  We maintain ADD on the stock with revised target price of Rs 5,516/share

Result Highlights

* Reported revenue of Rs 16,875 mn, up 5% QoQ in INR terms, up 3.5% QoQ in USD terms. The growth was led by Transportation vertical( up 5.1% QoQ) and Telecom and HiTech vertical( up 4.7% QoQ). Digital revenue continues to drive overall revenue growth and now accounts for 56% of revenue vs 55% in Q2.

* EBIT margin increased by 19 bps  QoQ to 18.6% due to positive operating leverage and   continued focus on productivity measures.

* During the quarter, it won a $45 mn deal and a total of  3 deals with TCV of $10mn plus

* Added 2,135 employees in the quarter to reach 20,118 employees. LTM attrition increased by 100 bps QoQ to 17.5%, in line with industry trend. Utilisation was down 220 bps QoQ to 75.9%

* It has maintained FY22 USD revenue growth guidance of 19‐20%.

* Declared interim dividend of Rs 10/ share.

Valuation

The stock trades at stretched PER of 39.6x on FY24E EPS. Robust deal booking provides strong visibility about revenue outlook over medium term and continued focus on productivity measures should help it to sustain EBIT margin. However, it faces potential margin headwinds such as travel expenses coming back and high attrition. We   value the stock at 43x on FY24E earnings, arriving at target price of Rs 5,516 /share

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