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About the stock: Birlasoft Ltd (Birlasoft) has strength in non-ERP digital businesses like CRM, B & data analytics, app development & enterprise solution.

* The company caters to manufacturing, BFSI, energy & utility and life sciences

* Debt free and healthy double digit return ratio (with RoCE of >18%)

Q4FY23 Results: Birlasoft reported muted revenue numbers in Q4FY23.

* Revenue grew 0.5% in dollar terms & 3.1% QoQ in CC terms (ex-Invacare)

* Reported EBITDA margin of 13.6% in Q4

* Signed TCV of US$286 mn during the quarter

What should investors do? Birlasoft’s share price has grown by ~2.7x since its demerger (from ~| 114 in February 2019 to ~| 310 levels in May 2023).

* We maintain our HOLD rating on the stock

Target Price and Valuation: We value Birlasoft at | 340 i.e., 15x P/E on FY25E EPS.

Key triggers for future price performance:

* Change in management, organisation restructuring, hiring of new vertical leaders likely to recover revenue growth momentum

* Revenue growth is expected to be achieved via client mining, cross sell, annuity & multi-year deals, expansion in Europe & APAC and focus on niche verticals

* Expect rupee revenues to grow at 8.3% CAGR over FY23-25E

* Expect EBITDA margin to be at 16.1% by FY25E on the back of easing of supply side challenges, higher utilisation, etc

Alternate Stock Idea: Apart from Birlasoft, in our IT coverage we also like Newgen.

* Strong logo additions, increasing annuity revenues & GSI opportunity to aid revenue growth

* BUY with target price of | 660

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