eClerx Services - Company Update - Q1FY21 - ICICI Securities

eClerx Services' dollar revenues declined 6.0% QoQ mainly due to supply and demand side challenges. However, EBIT margins increased 280 bps QoQ to 19.6% mainly led by lower travel and marketing expenses. The company expects a gradual increase in revenues. However, it expects margins to remain volatile due to wage hikes in Q2 & Q3 and return to office costs. The company has completed buyback of Rs. 109.5 crore.

Valuation & Outlook

We expect the company to witness a gradual improvement in revenues in coming quarters mainly led by improved deal wins and stabilisation of CLX revenues. In addition, despite cost pressure, we expect margins to improve in FY21E led by cost rationalisation and improved revenue growth. However, revenues have been volatile in the past due to project roll offs and automation of business. In addition, eClerx' exposure to travel, retail and luxury retail segment keep us cautious on the stock. Hence, we maintain our HOLD rating on the stock with a revised target price of Rs. 570 (9x FY22E EPS).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_eClerx_CoUpdate_Aug20.pdf

Shares of ECLERX SERVICES LTD. was last trading in BSE at Rs.675.6 as compared to the previous close of Rs. 620.5. The total number of shares traded during the day was 98470 in over 6216 trades.

The stock hit an intraday high of Rs. 735.15 and intraday low of 631.55. The net turnover during the day was Rs. 67533663.

Source : Equity Bulls

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