Buy Emudhra; target of Rs 552: YES Securities

YES Securities is bullish on Emudhra has recommended buy rating on the stock with a target price of Rs 552 in its research report dated July 31 2023.

Broker Research

August 03, 2023 / 08:55 IST

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YES Securities' research report on Emudhra

Emudhra (EMUDHRA) reported mixed financial performance for the quarter. The sequential revenue growth and EBITDA margin for the quarter was slightly below estimates. It reported sequential revenue growth of 3.8% QoQ, led by Trust Services( down 1.9% QoQ) and Enterprise solutions(up 6.3% QoQ). The Enterprise segment continues to maintain robust growth trajectory led by strong traction in Middle East, the US and APAC. The international revenue mix continues to increase led by the expansion of Enterprise business in foreign markets. The pricing pressure in the Trust services business is largely over and the segment is expected to resume normal growth from Q2FY24. EBITDA margin for the quarter declined by 113 bps QoQ to 29.8% for the quarter on account of higher operational expenses incurred in expanding its presence in the foreign markets of the US and Europe. 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. We estimate revenue CAGR of 43.5% over FY23‐25E with average EBITDA margin of 33.5%.

Outlook

We maintain our BUY rating on the stock with revised target price of Rs 552/share at 33x on FY25E EPS. The stock trades at PER of 42.8x/27.0x on FY24E/FY25E EPS.

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