Buy Emudhra; target of Rs 399: YES Securities

YES Securities' research report on Emudhra

Emudhra (EMUDHRA) reported mixed financial performance for the quarter. The sequential revenue growth for the quarter was slightly below estimates; while EBITDA margin was slightly below expectation. It reported sequential revenue growth of 4.7% QoQ, led by Trust Services( up 0.7% QoQ) and Enterprise solutions(up 7.1% QoQ). EBITDA margin declined by 252 bps QoQ to 34.7% for the quarter on account of higher operational expenses. It has expanded its sales team in North America, Middle East and Africa to drive its Enterprise business. The demand environment remains strong led by rising digitalization across sectors. We expect Enterprise segment to grow faster than Trust Services, driving the overall growth of the company. Its strong portfolio of enterprise solutions and deep relationships with system integrators should help to drive the Enterprise business. The EBITDA margin is expected to improve in medium term going ahead led by positive operating leverage.

Outlook

We estimate revenue CAGR of 36.6% over FY22‐24E with average EBITDA margin of 38.0%. We maintain our BUY rating on the stock with unchanged target price of Rs 399/share at 33x on FY24E EPS. The stock trades at PER of 34.5x/23.3x on FY23E/FY24E EPS.

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