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Weak performance in Platform and Product business impacted the performance for the quarter

Our view

Overall, the performance was slightly below expectation due to weak performance in Product and Platform business. However, the services business constituting 88% of revenue showed strong growth momentum.  Trades at attractive valuation at PE of 18.6x on FY24E EPS. We expect it to report revenue CAGR of 12.8% with average EBIT margin of 20.8% over FY22‐FY24. We maintain BUY Rating in the stock with revised target price of Rs 1,509.

Result Highlights

* Both Revenue and Operating margin were below estimate. Reported revenue of Rs 206.5 bn( up 2.6% in USD terms, up 2.9% in INR terms) . The growth was 3.5% in cc terms( impacted due to 8% QoQ decline in P&P business (forms 11.7% of total revenue). The services business forming 88.3%   showed strong growth of 5.2% in cc terms. The decline(8% QoQ) in Product and Platform business was due to weak seasonality and also few deals slipped from Sep to Dec quarter.

* EBIT margin declined by 60 bps to 19%, on lower revenue from P&P and wage hike in the quarter.

* Deal environment remained strong as it reported new deal wins at $2.2bn( up 38% YoY), led by 14 new large deal wins. LTM attrition increased by 390 bps to 15.7% led by higher demand for talent. Added 11,135 employees during the quarter( highest in the last 24 quarters) to reach total employee strength of 187,634.

* Kept FY22 guidance unchanged at double digit revenue growth with EBIT margin band of 19‐21%

Valuation

The stock trades at PER of 18.6x on FY24E EPS. Robust deal booking provides strong visibility about revenue outlook It is expected to meet  its FY22 revenue growth guidance of double digit revenue growth with EBIT margin band of 19‐21%. We rollover to FY24E estimates and value the stock at 10% discount to Wipro at 22.5x on FY24 earnings, arriving at target price of Rs 1,509/share  

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