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Growth outlook remains strong over medium term

Our view

Overall, strong performance along with sequential improvement in margin in this tough supply constrained environment. While, the performance remains broadbased, the pickup in travel and transportation vertical has been supporting growth. The demand environment remains strong and the robust deal booking offers strong revenue visibility for FY23 and it would remain among the growth leaders in tier 2 IT space.  The guidance of 20% revenue growth in cc terms for FY23 remains strong. The company is expected to achieve adjusted EBITDA margin of around 19% for FY23 led by higher offshoring and improving employee pyramid

We maintain BUY Rating on the stock with revised target price of Rs 4,654/share at 30x on FY24E EPS. The stock trades at PER of 23.3x on FY24E EPS.

Result Highlights

* Reported revenue of Rs 17.4bn( up 5.1% QoQ in INR terms; up 4.9% QoQ in USD terms). The growth was led by strong recovery in Travel , Transportation and hospitality segment.

* EBIT margin grew 70 bps QoQ to 15.8%, led by control on employee cost, which grew 3.7% QoQ, but down 90 bps sequentially as percentage of revenue. 

* Deal booking remained strong as it reported fresh order intake of $301mn in the quarter compared to $247 mn in Q3FY22 and $201mn in Q4FY21.

* Offshore revenue mix grew by 100 bps QoQ to 47%. Added 12 clients in quarter compared to 13 in Q3FY22.

* Number of employees increased by 370 QoQ( 1.7% QoQ) to 22,500. 

* Utilization ( including trainees)was down 100bps sequentially to 76.1%; While LTM attrition increased by 140 bps QoQ to 17.7%( among the lowest in tier 2 category).  DSO improved by 7 days QoQ to 63 days.

* Also declared interim dividend of Rs 13/ share.

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