Buy Birlasoft; target of Rs 320: Sharekhan

Sharekhan is bullish on Birlasoft has recommended buy rating on the stock with a target price of Rs 320 in its research report dated February 03, 2023.

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February 08, 2023 / 15:48 IST

26 Aug, 2025 12:21

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Sharekhan's research report on Birlasoft

For Q3FY23, Birlasoft reported weak USD revenues of $148.4 million, up 3.5% y-o-y/down 0.3% q-o-q with flat CC revenue growth, missing our CC growth estimates of 1.7% q-o-q due to decline of 7.1% q-o-q in Enterprise Solutions, which was offset by a growth of 5.5% q-o-q in Business & Technology Transformation. EBITDA at Rs.7.4 crore was impacted due to a one-time provision taken on account of filing of bankruptcy by one of a major client-Invacare. EBITDA margin at 0.6% was impacted due to higher than usual furloughs and investments and one-time provision. New deal wins moderated to $102 million in Q3FY23 although the company signed strong deal wins at $231 million TCV up 39% q-o-q. Birlasoft has created a provision amounting to Rs 151.04 crore against the outstanding receivables and contract assets. They are not expecting any revenues from Invacare in Q4FY23. The management stated that while provision has been made to account for the revenue impact, on the cost side they need more clarity on account of many nuances and are taking legal opinion on the same.

Outlook

Global macro challenges coupled with bankruptcy of major client raises concern on FY24 growth/ margin outlook and the same would be near term overhang on Birlasoft. However, post the recent correction we believe the robust deal pipeline and long-term earnings potential would continue to act as tailwinds .Hence we maintain Buy on Birlasoft with revised PT of Rs 320. We advise investors to adopt a staggered approach to invest from long term perspective.

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