Company Update - eClerx Services - ICICI Securities

eClerx Services reported dismal Q4FY20 revenues. Dollar revenues declined 7.9% QoQ while EBIT margins declined 593 bps QoQ to 16.8%. Revenues were impacted by Covid supply constraints (half of the QoQ fall is attributable to this) while the other half of QoQ decline was due to planned roll offs (that were not replaced by new sales) and the impact on the company's business in Italy. Margins were impacted by a sharp fall in revenues and higher general & administration expenses.

Valuation & Outlook

The company is expected to witness near term pressure on revenues mainly led by some supply side challenges, lower demand, impact in voice and exposure to retail & travel vertical (that we believe together may account for 10% of revenues). Further, margins are also expected to witness pressure due to higher work from cost and sharp dip in Q1FY21E revenues. However, most negatives are already factored in the stock and expected recovery in FY22E prompt us to maintain our HOLD rating on the stock with a revised target price of Rs. 400. Key trigger for the stock can be buyback (which may not be possible in near term due to uncertainties and cash conservation).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_eClerx_CoUpdate_Jun20.pdf

Shares of ECLERX SERVICES LTD. was last trading in BSE at Rs.407.4 as compared to the previous close of Rs. 429.55. The total number of shares traded during the day was 5887 in over 1195 trades.

The stock hit an intraday high of Rs. 424.05 and intraday low of 404.4. The net turnover during the day was Rs. 2421464.

Source : Equity Bulls

Keywords