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CRISIL maintains valuation grade of 3/5 to eClerx Services

Published on Thu, Feb 02, 2012 at 14:32 | Source : Moneycontrol.com

Updated at Thu, Feb 02, 2012 at 14:36

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eClerx Services

BSE | NSE 30/05/12

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CRISIL Research has come out with its report on eClerx Services . The research firm has maintained the fundamental grade of 4/5 to the company in its February 01, 2012 report.

eClerx Services Ltd's (eClerx's) Q3FY12 revenue in dollar terms was in line with CRISIL Research's expectations driven by sustained growth in both top five and non-top five clients. Revenue in rupee terms, operating profitability and PAT were better than expected due to rupee depreciation. We have revised FY12 and FY13 revenue and earnings estimates upwards mainly driven by the rupee-dollar exchange rate revision of 4.5% for FY12 and 7.9% for FY13. We maintain the fundamental grade of 4/5.

Q3FY12 result analysis
� Q3FY12 revenue in US$ terms grew by 4.5% q-o-q (~30% y-o-y) to US$ 25.4 mn driven by 4.5% q-o-q growth in revenue from both top five and non-top five clients. Revenue in rupee terms grew by 16% q-o-q (up 51.3% y-o-y) to Rs 1.3 bn due to depreciation of the rupee against the US$.

� Employee cost as a percent of sales declined by 444 bps q-o-q (272 bps y-o-y) to 39.3% and other expenses as a percent of sales declined by 191 bps q-o-q (76 bps y-o-y) to 15.4% mainly due to rupee depreciation. As a result, EBITDA increased by 35% q-o-q (64% y-o-y) to Rs 597 mn. EBITDA margin improved by 635 bps q-o-q (349 bps y-o-y) to 45.2%.

� This quarter, the company added 116 employees compared to 140 in Q2FY12 and 196 in Q3FY11 as the attrition declined to 26.3% from 38.7% in Q2FY12 and 37% in Q3FY11, and employee utilisation improved 100 bps q-o-q (200 bps y-o-y) to 72%.

� Forex loss incurred on derivative contracts due to weaker rupee reduced other income by ~55% q-o-q. As a result, PAT increased by ~13% q-o-q (~39% y-o-y) to Rs 499 mn despite stronger growth in EBITDA.

� Q3FY12 EPS was Rs 17.2.

� The company was able to sharply reduce debtor days to 52 from 76 days in Q2FY12 as the company focussed on collections but is expected to return to long-term average of 60-70 days.

� Rupee depreciated by ~14% in Q3FY12.

Valuation: Current market price is aligned
We continue to use the price to earnings ratio (PER) method to value eClerx. Since earnings have been revised only due to revision in the exchange rate, we maintain the fair value of Rs 760 per share. At this value, the implied P/E multiple is 11.5x FY13 EPS (ex-hedging gains) of Rs 66.4. At the current market price of Rs 716, the valuation grade is 3/5.

To read the full report click on the attachment

Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.