eClerx Services Ltd. share price target

Project Roll-offs, Lack of Backfill Pressurise Revenue eClerx Services (eClerx) has reported a poor performance in 1QFY19 with its revenue declining by a steep 6.3% QoQ (-6.5% QoQ in CC terms) to US$49.2mn (7.2% below our estimate) led by lack of backfill for short-term projects that winded down during the quarter and project roll-offs. In INR terms, revenue declined by 2.5% QoQ to Rs3.52bn (2.5% below our estimate). Despite multiple headwinds on margin front i.e. poor top-line performance, wage hike, higher SG&A; cost and lower utilisation, its EBIT margin expanded by 25bps QoQ to 19.2% owing to cost optimisation efforts and lower depreciation led by annual WDV reinstatement impact. Notwithstanding higher...

At 22.3%, EBITDA margins declined ~430 bps QoQ, much below our estimate of 26.9%, expansion of 30 bps. The EBITDA margin decline was on the back of increasing contribution of onshore revenues (23% to revenues in Q4FY18 vs. 4% in Q4FY17) and higher expenses Reported PAT of | 64.4 crore was below our expectation of | 66.1 crore mainly on account of lower-than-expected EBITDA margin partly offset by higher-than-expected other income Strong growth of 7% QoQ due to specific projects, Q1FY19E to be soft...

Maintain NEUTRAL on eClerx with TP of Rs 1,285, 14x FY20E. eClerx posted strong revenue and sub-par operating performance. Revenue came at USD 53mn, 7.4% QoQ (6.5% CC) and FY18 revenue stood at USD 199mn, 2.3% YoY (vs. 2.5% decline in FY17). EBIT% came at 18.7%, -417bps QoQ (impacted by non-recurring items -270bps impact). FY18 EBIT% stood at 23.3%, -800bps YoY impacted by increase in delivery cost with onshore expansion (-560bps YoY impact) and S&M; impact of -240bps (increase in senior management hires and higher travel expense). 4Q APAT stood at Rs 0.64bn, 11.5% QoQ.

eClerx's business outlook on the revenue front has improved, and we expect double digit revenue growth from FY19E onward. However, owing to margin pressures, EPS growth has been poor (-18.1% in FY18). Nonetheless, we expect margin stability from FY19E onward, which along with 12.3% USD revenue CAGR, is expected to drive >14% adjusted EPS CAGR over FY18FY20E. Thus, given an improving outlook, we upgrade eClerx from REDUCE to HOLD, with...

eClerx' Q3 revenue grew 1% QoQ, in line with our estimate. However, EBIT margin declined 230 bps QoQ to ~23% (vs. our estimate of 25%) on higher business development expenses, increase in onsite delivery staff and higher G&A; expenses.

ICICI Securities Ltd | Retail Equity Research eClerx reported Q3FY18 earnings, where US$ revenues were largely in line with our expectations while EBITDA margin and net profit were way below our expectations US$ revenues grew 1.0% QoQ to $48.9 million and were largely in...

eClerx Services (eClerx) has reported another underwhelming performance in 3QFY18, with its USD revenue rising by just 1% QoQ (1.1% QoQ in CC terms) to US$48.9mn, missing our estimate by 1.9%. However, eClerx's INR revenue grew by 2.7% QoQ to Rs3.34bn, beating our estimate by 5.3%, owing to higher currency realisation. The company reported a major underperformance on operating margin front, with its EBIT margin crashing by a steep 264bps QoQ to the lowest-ever 22.8%, missing our estimate by a substantial 268bps owing to low revenue growth, and higher employee and SG&A; cost. Notably, new business in areas like Managed Services, Robotic Process Automation (RPA) and Analytics having lower initial...

Maintain SELL on eClerx with TP of Rs 1,145, at 13x Dec-19E EPS eClerx posted in-line revenue, while operating performance was sub-par. Revenue came at USD 48.9mn, 1.1% CC QoQ. Growth was led by Top-6 to 10 and Non-top-10 accounts which grew 3.9% QoQ each, while Top-5 (60.5% of rev) accounts declined 0.6% QoQ. EBITDA% stood at 22.9%, -233bps QoQ with lower gross margin (-50bps impact with investments onsite) and higher SG&A; (-175bps impact with increase in business development staff). APAT came lower at Rs 0.57bn, -21.3% QoQ impacted by lower profitability and lower other income.

Eclerx' revenue de-grew 1% QoQ (our estimate: 2% QoQ decline) in Q2 on loss of business from one of the top clients in US. Operating margin (~25%) decreased ~160 bps QoQ owing to lower offshore utilization coupled with increase in onsite delivery cost.

We expect revenue/EPS growth at 7/2.5% CAGR over FY17-20E, factoring USD revenue growth of 1.0/9.9/10.2% and EBIT% at 26.9/27.6/27.7% for FY18/19/20E, respectively. Our negative view on eClerx is substantiated by sub-par industry growth (EPS CAGR of 2.5% vs ~12%) and premium valuations (>10%). Maintain SELL with a TP of Rs 1,085, 12x Sep-19E EPS. eClerx Services posted muted numbers, largely in-line with our estimates. Revenue came in at USD 48.4mn, -1.8% QoQ CC (USD 47.8mn est.), as growth in the emerging accounts (USD 1.4mn QoQ) was offset by a decline in Top-10 accounts (USD 1.8mn QoQ). Top accounts growth was impacted by revenue decline in a large US client (within top-6 and at >USD 5mn annual rev rate). EBIT% was lower by 163bps QoQ at 25.2%, impacted by an increase in onshore delivery and lower offshore utilisation (-230bps impact).