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Result Synopsis

Emudhra (EMUDHRA) reported mixed financial performance for the quarter. The sequential revenue growth for the quarter was above estimates; while EBITDA margin was slightly below expectation. It reported sequential revenue growth of 25.4% QoQ, led
by Trust Services( down 0.4% QoQ) and Enterprise solutions(up 39.9% QoQ). The Enterprise segment continues to maintain robust growth trajectory led by strong traction in Middle East, the US and APAC. The international revenue mix continues to increase led by the expansion of Enterprise business in foreign markets. The pricing pressure in the Trust services business is largely over and the segment is expected to resume normal growth from FY24E onwards. EBITDA margin for the quarter declined by 372 bps QoQ to 30.9% for the quarter on account of higher operational expenses.

The demand environment remains strong led by rising digitalization across sectors. We expect Enterprise segment to grow faster than Trust Services, driving the overall growthof the company. Its strong portfolio of enterprise solutions and deep relationships with system integrators should help to drive the Enterprise business. The EBITDA margin is expected to improve in medium term going ahead led by positive operating leverage. We estimate revenue CAGR of 38.9% over FY23?25E with average EBITDA margin of 38.6%. We maintain our BUY rating on the stock with revised target price of Rs 437/share at 24x on FY25E EPS. The stock trades at PER of 23.1x/15.5x on FY24E/FY25E EPS

Result Highlights

* Reported revenue of Rs 768.1mn (up 25.4% QoQ, up 69.2% YoY). The sequential growth was led by 39.9% QoQ increase in Enterprise business, while its Trust Services growth remained flat (down 0.4% QoQ).
* EBITDA margin declined by 372 bps QoQ to 30.9% for the quarter, led by higher operating expenses (up 78% QoQ to Rs 123 mn)
* Retail Customers for FY 2023 stands at 249,000, representing a growth of 30.4% YoY.
* Cash and cash equivalents (including deposit and liquid investments) amounted to INR 1,193.25 million as on 31st March 2023 and it remains debt free
* PAT increased by 3.3% QoQ to Rs 158.3mn, led by higher revenue
* Declared a final dividend of Rs 1.25/- per share.

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