Buy eClerx Services; target Rs 950: Hem Securities

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Buy eClerx Services; target Rs 950: Hem Securities

Hem Securities is bullish on eClerx Services and has recommended buy rating on the stock with a target price of Rs 950 in its November 15, 2011 research report.

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Hem Securities is bullish on eClerx Services and has recommended buy rating on the stock with a target price of Rs 950 in its November 15, 2011 research report.

"eClerx Services have maintained a compounded annual growth rate of 42% in revenue and 40% in net profit over the past three years. The company has registered excellent numbers for the quarter ending September 2011. A sharp rise of 38% in the consolidated sales to Rs. 1137.41 million was witnessed in the quarter as compared with Rs.822.87 million in the same quarter last year. Operating profit surged to Rs.442.42 million from the corresponding previous quarter of Rs.297.81 million. Net profits skyrocketed sharply by about 60%. The company has witnessed sharp rise in margins, operating profit expanded 271bps y-o-y; benefitting greatly from the sharp depreciation of the rupee this quarter. Net profit margins climbed 535 bps from a year ago quarter to stay at 38.90%."

"Forex gains were witnessed during the quarter driven by period end revaluation of forex assets. Revenue contribution from Fortune 500 clients stood flat at about 97% of total revenue. Utilization in this quarter was very high, 71% compared to 67- 68% number for the previous quarter. Client concentration came down QoQ from 88% to 86%. It is the first quarter in which emerging clients grew faster than Top 5 (y-o-y). 5 new clients were added during the first half year. Revenue contribution from North America has sharply grown from 60 percent to 65 percent y-o-y where as revenue contribution from Europe has reduced to 26 percent from 33 percent. ROW contribution has increased to 9%."

"Eclerx holds a strong position in Indian ITES industry with consistent growth trajectory. It is one among the largest third party KPO focused firms in India. Going forward, we expect it to clock an EPS of Rs.49.02 and Rs.57.72 in FY12 and FY13 respectively. We initiate a 'BUY' on the stock with a target price of Rs.950 expecting an appreciation of about 26% from the current level with the short to term investment horizon," says Hem Securities research report.

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To read the full report click on the attachment