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Buy Birlasoft target of Rs 210: ICICI Direct

ICICI Direct is bullish on Birlasoft recommended buy rating on the stock with a target price of Rs 210 in its research report dated August 20, 2020.

August 21, 2020 / 02:05 PM IST
 
 
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ICICI Direct's research report on Birlasoft


Birlasoft Ltd (Birlasoft) post the merger with KPIT Technologies has successfully overcome integration challenges, restructured its sales & delivery functions and optimised its cost structure. Apart from this, the complimentary business of merged companies has enabled Birlasoft to win large deals and improve deal wins. Going forward, we expect improving opportunities from cross sell, large deal wins, client mining opportunities, focus on niche verticals and geographical expansion to drive revenues in the long run. In addition, cost rationalisation and migration to new tax regime will help improve EBITDA and PAT margins. As a result, we expect revenues, profits to increase at 11%, 25% CAGR, respectively, in FY20-23E.



Outlook


Birlasoft’s focus on niche verticals, geographic expansion, cross selling, client mining, large deal wins are key long-term revenue drivers. This coupled with talent from tier 1 players will drive revenue growth. Also, cost efficiency, tax rationalisation will drive profitability. Further, the company’s healthy cash balance could lead to inorganic expansion or healthy dividend payout. This, coupled with attractive valuation of 11x FY23E EPS prompts us to recommend BUY with target price of Rs 210 (13x FY23E EPS).

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first published: Aug 21, 2020 02:05 pm
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