Hold eClerx Services; target of Rs 400: ICICI Direct

ICICI Direct's research report on eClerx Services

eClerx Services reported dismal Q4FY20 revenues. Dollar revenues declined 7.9% QoQ while EBIT margins declined 593 bps QoQ to 16.8%. Revenues were impacted by Covid supply constraints (half of the QoQ fall is attributable to this) while the other half of QoQ decline was due to planned roll offs (that were not replaced by new sales) and the impact on the company’s business in Italy. Margins were impacted by a sharp fall in revenues and higher general & administration expenses.

Outlook

However, most negatives are already factored in the stock and expected recovery in FY22E prompt us to maintain our HOLD rating on the stock with a revised target price of Rs 400. Key trigger for the stock can be buyback (which may not be possible in near term due to uncertainties and cash conservation).

eClerx Services 14062020