Buy eClerx Services Ltd For Target Rs.2650 - ICICI Direct
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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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