eClerx shares surge 9% after Q4 results, outlook revised

eClerx Services shares rose more than 9 per cent after its March quarter results, according to the company's website. Nuvama Institutional Equities expects growth for eClerx to remain subdued in the near term due to cut in client spends impacted by weak global macro. It suggested a share price target of Rs 1,670, a marginal decline over a 52-week high of Rs 1,676. On May 29 the number reached 65, an increase from 58 on May 30.

Nuvama said eClerx's sequential revenue growth was 0.9 per cent compared to Street's estimate of 1.4 per cent. EBIT margin increased by 190bps QoQ to 25.3 per cent, more than Street's estimate of 24 per cent. Profit was in line with the Estimate of 129 crore, Nuvama said, adding that the IT firm also announced the appointment of Mr. Kapil Jain as Group CEO and MD to lead its next phase of growth journey.

The Q4 Ebitda margin expanded 210 bps because of reduced supply-side pressure and employee cost cuts by the company in advance, in anticipation of a slowdown.

Nuvama expects revenue growth for eClerx to stay under pressure, as clients are looking to reduce discretionary spending. roll-offs in the current quarters were smaller, but any higher-than-expected roll-offs can impact growth trajectory, it said.

The company expects Q 1 FY24 to be subject to headwinds, with the possibility of revenue growth being in the low single digit or marginally negative. It hoped growth in H2 FY 24 would rebound.

In the March quarter, headcount decreased sequentially by 677 - a first decline in the last nine quarters.

Offshore voluntary attrition increased 460 bps QoQ and down 1,290 bps YoY - within the company's comfort range. The two companies said easing supply-side pressure will help maintain FY 24 Ebitda margins similar to Q 4 FY 23 30 percent Nuvama expects margins for eClerx to improve YoY due to lower supply-side challenges. The company has revised its EPS estimates for FY 24 and FY 25 with 3.7 per cent - 5.4 per cent and maintains its HOLD rating on the stock with an increase target of 1,670 from Rs 1620, valuing the stock at 13 times FY 24 E EPS.