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Maintains uptick in its growth momentum

Our view

Overall, strong sequential revenue growth with stable margin in this environment of supply constraints. Reiterated double digit organic growth guidance for FY22 with ~15% EBIT margin.  Expected to benefit from rising 5G related deal momentum as it remains highly dependent on telecom vertical(~40% of revenue).  We expect revenue to grow at CAGR of 14.0% over FY22E‐FY24E with average EBIT margin of 15.6%. We maintain ADD Rating on the stock with revised target price of Rs 1,783/share.

Result Highlights

* Reported revenue of Rs 108.8bn( above estimate; up 6.4% QoQ in USD terms; up 6.7% in INR terms). The growth was broad based across verticals.   In terms of geographical breakup, Europe had soft quarter with sequential growth of 1.6% QoQ. 

* EBIT margin was flat QoQ at 15.2% even in this supply constrained environment. (There was no wage hike in the quarter)

* Reported robust deal win momentum with net new TCV win of $750 mn, which was broad‐based across verticals and deal sizes

* Offshore revenue mix increased by 100 bps QoQ to 39%, as per industry trend. Number of active clients increased by 65 QoQ to 1,123.

* Utilization was down 100 bps to 87% as they  hired 15k employees in the quarter. LTM attrition was up 400 bps QoQ to 21%(an area of concern)

* DSO improved by 1 day QoQ to 92 days

* Announced special dividend of Rs 15/ share.

Valuation

The stock trades at PER of 18.4x on FY24E EPS. Robust deal booking provides strong visibility about revenue outlook over medium term, though it faces near term margin risk due to high attrition. We rollover to FY24E estimates and value the stock at 21x on FY24E earnings, arriving at target price of Rs 1,783/share.

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