Sharekhan's research report on Intellect Design Arena
Intellect Design reported revenues of $66.1 million in Q2FY23, a decline of 5.6% q-o-q due to a shortfall in accounting for $6million of revenues. This was due to $3.1 million of revenues were contracted in Q2FY23 but will be reflected in Q3FY23 and due to transitioning of $2.9 million of revenues to Platform revenues over the subsequent quarters. EBIT margins plunged to 15.9% from 21.6% due to higher talent costs, higher travel, and SG&A expenses. Management has indicated a visibility of an annual growth of 20% for FY23 while lowering its EBITDA margin guidance to 20%+ from 22-25% for FY2023E citing slowdown due to macro concerns and transition of certain License revenues to Platform revenues.
We downgrade Intellect Design to Hold with a revised PT of Rs. 560, given near-term concerns on growth and margins.