Birlasoft Ltd. share price target

Birlasoft’s revenue grew 3.1% QoQ (2.7% in cc terms) to US$ 153.6mn. Adjusted for receipt of US$ 2mn for disengagement services pertaining to settlement with Invacare, revenue grew 1.7% QoQ (1.4% in cc terms). OPM stood at 15.3%, aided by better gross margin, lower SG&A expenses, better utilization, automation and lower attrition.

Birlasoft has reported Q2FY23 revenue of US$148.8mn, up 0.1% QoQ in US$ terms, much lower than our estimate of +2% QoQ.

Birlasoft reported in line EBIT margin of 13%. Sequential drop of 100bps QoQ in margin was due to high cost of hiring, mid and junior level employee promotions and lower utilisation (82.5%, -270bps QoQ). Utilisation dropped due to delayed ramp up of the two deals. In Q2FY23, management expects headwinds from wage hikes to result in 2.5-3% QoQ higher employee expense as a % of revenue.