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Our view

The revenue growth was inline in the quarter and it was able to increase its margin sequentially led by improvement in quality of business mix. It is well on track to deliver 15%+ revenue growth for FY22 and is expected to sustain its EBIT margin of 17%. Margin profile in Telecom and Hitech segment is expected to improve going ahead. Business outlook remains robust as it is witnessing higher traction in segments such as 5G, electric vehicles, green energy, etc. Strong deal wins reflect robust growth visibility in outsourcing of engineering services.  However, most of that growth is priced in as It trades at 35.6x on FY23 earnings. Consequently, we maintain ADD rating on the stock with target price of Rs 3,705.

Result Highlights

* Reported revenue of $205.7 mn ( up 4.2% in USD terms) which was as per estimate. Growth was led by better traction in industrial products with some softness in Medical Devices segment. Digital revenue now contribute 54% of revenue.

* EBIT margin grew 68 bps QoQ, which was above estimate, led by improvement in the quality of revenue and other productivity measures.

* Deal wins remains strong as it won 6 deals of $10 mn+, including two $25mn+ deals

* Offshore revenue mix grew 20 bps QoQ to 58.1% as per the industry trend.

* Utilisation increased by 30 bps QoQ to 79.2%. LTM attrition increased by 230 bps QoQ to 14.5% due to higher demand for talent. Net addition of ~500 employees during the quarter.

* Has raised its USD revenue growth guidance for FY22 to 15‐17% band from previous guidance of 13‐15%.

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