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Revenues to improve in coming quarters...

About the stock: eClerx Services (eClerx) provides business process management, automation and analytics services.

* It caters to financial services, communications, retail, media, manufacturing, travel and technology companies

* OCF to EBITDA of >80%, debt free and RoCE of >20%.

Q1FY22 Results: eClerx reported Q1FY22 results.

* Dollar revenues increased 1.4% QoQ to US$64.7 million

* EBITDA margin declined 240 bps QoQ to 30.4%

* Announced buyback at | 3200/share for an amount of | 303 crore

What should investors do?

eClerx’ share price has grown by ~1.4x over the past five years (from ~| 1570 in August 2016 to ~| 2,172 levels in August 2021).

* We continue to remain positive and retain our BUY rating on the stock

Target Price and Valuation: We value eClerx at | 2,650 i.e. 21x P/E on FY23E EPS

Key triggers for future price performance:

* Traction in customer care, RPA, analytics & content development, cross sell and up sell to Personiv clients to drive growth

* Lower roll offs from one off client specific event, improving deal wins and revival in growth are expected to drive revenues

* Expect dollar revenues to grow at 19.7% CAGR in FY21-23E

Alternate Stock Idea: Apart from eClerx, in our IT coverage we also like Zensar.

* Turnaround led by new CEO, driving deal momentum and increasing annuity revenues key positive

* BUY with a target price of | 505

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