Hold Intellect Design Arena; target of Rs 560: Sharekhan

Sharekhan recommended Hold rating on Intellect Design Arena with a target price of Rs 560 in its research report dated October 28, 2022.

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November 01, 2022 / 04:34 PM IST

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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.

Outlook

We downgrade Intellect Design to Hold with a revised PT of Rs. 560, given near-term concerns on growth and margins.