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Buy eClerx Services; target of Rs 2700: Emkay Global Financial

Emkay Global Financial is bullish on eClerx Services has recommended buy rating on the stock with a target price of Rs 2700 in its research report dated December 15, 2021.

December 17, 2021 / 05:12 PM IST
 
 
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Emkay Global Financial's report on eClerx Services


After five years of muted performance, the post-FY20 recovery in eClerx’s revenue growth appears sustainable, in our view. The recovery is driven by a healthy demand environment, lower roll-offs, stability at top clients and continued growth in emerging clients. We forecast a ~15% revenue CAGR (organic ~11.4%) over FY21-24E. EBITM rebounded strongly by 690bps/340bps YoY in FY21/H1FY22 after a 1560bps fall in FY16-20. EBITM growth was aided by revenue acceleration, WFH savings and other operating efficiencies. We expect WFH-related opex savings to partly normalize. We expect EBITM to moderate during FY22-24 but remain higher than the FY20 level. eClerx has been successful in acquiring digital capabilities, broadening its portfolio and integrating those capabilities with its business, culminating in good upsell and cross-sell opportunities. The Personiv acquisition will add SMB sector clients and offer opportunities to cross-sell automation, analytics and other managed services to SMB clients.



Outlook


We initiate with Buy and a TP of Rs2,700 at 20x on Dec’23E EPS, considering near-term demand tailwinds, overall execution capabilities of the company, steady cash generation and prospects of a 16.6% profit CAGR over FY21-24.


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first published: Dec 17, 2021 05:12 pm
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