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Our view

The revenue and margin performance for the quarter was a bit subdued, partially impacted by 2nd covid19 wave. Investment in digital engineering and geographical expansion also had negative impact on  margin for the quarter. We believe that these investments will drive growth from second half of FY22. Record deal booking provides strong revenue growth visibility. It trades at attractive valuation of 17x on FY23 earnings. We maintain BUY on the stock with revised target price of Rs 1,160

Result Highlights

* Reported revenue of $2,720 mn, up 0.9% QoQ, ( up 2.2% QoQ in INR terms) less than expected due to around $7mn impact in Revenue from 2nd covid wave disruption in IT Services delivery and weak growth in Product business. Sequential growth was led by strong performance in E R&D services. In terms of verticals, Financial Services and Healthcare performed relatively better.

* EBIT Margin declined by 70 bps QoQ to 19.6% ;decline was slightly more than expected due to around 90 bps impact of covid19 2nd wave. Also, investment in digital engineering capabilities and geographical expansion had adverse impact on margin

* Strong deal booking as it signed new deal wins of $1.66 bn, up 37% YoY, that included 8 large service deal wins.

* Net cash at $2bn as of Q1FY22. DSO increased by 2 days during the quarter.

* LTM Attrition increased by 190 bps QoQ to 11.8%( one of the lowest in industry). Added 7,522 employees during the quarter with total headcount at 176,499.

* Declared dividend of Rs 6/ share for the quarter.

* FY22 guidance: Double digit revenue growth with EBIT margin band of 19‐21%

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