8/3/2019 eClerx Services Ltd IER Quarterly Update First Cut
1/1
CRISIL Limited. All Rights Reserved. CRISIL RESEARCH | 1
eClerx Services LtdRevenues in-line; PAT margin higher than
expected
Fundamental Grade 4/5 (Superior fundamentals)Valuation Grade 3/5
(CMP is aligned)
Industry IT Services
Fair Value Rs 714CMP Rs 732
October 19, 2011
eClerx Services Ltds (eClerxs) Q2FY12 results were better than
CRISIL
Researchs expectations. While revenue growth was in-line, PAT
margin washigher than expected. Strong growth across non-top five
clients and steady
mining of top five clients resulted in robust topline growth
during the quarter.
EBITDA margin declined slightly due to the expected ramp-up in
sales and
marketing (S&M). PAT margin was higher than expected due to
forex gains.
We maintain the fundamental grade of4/5.
Q2FY12 result analysis
eClerxs Q2FY12 revenues grew by 8.8% q-o-q (35% y-o-y) to US$
24.3
mn; up 14.2% q-o-q (38% y-o-y) in Indian rupee terms. This was
mainly
driven by a strong rebound in growth from non-top five clients,
up 26.9%
q-o-q after a 9.7% decline in the previous quarter. Revenues
from top five
clients maintained the steady growth trajectory and increased
6.3% q-o-q.
EBITDA margin declined slightly by 32 bps q-o-q to 38.9% due to
the
expected acceleration in S&M efforts towards non-top five
clients.
Employee cost as a percentage of sales declined 106 bps due to
increase in
staff utilisation to 71% from 67% in Q1FY12. However, the
reduction in
employee cost was offset by higher general and administrative
(G&A costs)
on the back of increase in legal and professional expenses.
Adjusted PAT margin improved by 359 bps q-o-q to 38.9% due to
higher
forex gains. The increase in forex gains from Rs 40.2 mn in
Q1FY12 to Rs
102.4 mn in Q2FY12 was partly driven by the period-end
revaluation of
forex assets. Adjusted EPS for Q2FY12 was Rs 15.3 as compared to
Rs 12.2
in Q1FY12.
Key developmentsx Debtor days increased further to 76 days from
67 days in Q1FY12 due to
client specific administration delays.
x Five new clients were added in this quarter. Total number of
active clients
increased to 50.
x Fortune 500 or FT 500 clients contributed the maximum revenue
(97%).
Valuations: Current market price is alignedWe continue to use
the price to earnings ratio (PER) method to value eClerx at
Rs 714. We are likely to raise our estimates and fair value post
interaction with
the management. At the current market price of Rs 737 and
current fair value,
the stock merits a valuation grade of3/5.
KEY FORECAST(Rs mn) FY09 FY10 FY11# FY12E FY13E
Operating income 1,973 2,570 3,421 4,429 5,543
EBITDA 815 1,004 1,346 1,646 1,969
Adj PAT 618 735 1,327 1,438 1,583
Adj EPS-Rs 21.4 25.5 46.0 49.9 54.9
EPS growth (%) 38.6 19.0 80.5 8.4 10.1
Dividend yield (%) 2.0 2.8 3.5 3.7 4.1
RoCE (%) 48.6 51.1 55.9 54.2 52.9
RoE (%) 41.4 40.2 59.2 51.1 45.3
PE (x) 34.2 28.7 15.9 14.7 13.3
P/BV (x) 12.7 10.6 8.5 6.7 5.5
EV/EBITDA (x) 15.7 12.6 14.6 11.7 9.4#FY11 numbers are based on
abridged financials
NM: Not meaningful; CMP: Current market price
Source: Company, CRISIL Research estimate
CFV MATRIX
KEY STOCK STATISTICSNIFTY 5038
NSE ECLERX
Face value (Rs per share) 10
Shares outstanding (mn) 28.8
Market cap (Rs mn)/(US$ mn) 21,104/430
Enterprise value (Rs mn) /(US$ mn) 19,644/401
52-week range (Rs) (H/L) 875/572
Beta 0.95
Free float (%) 45.2
Avg daily volumes (30-days) 33,362
Avg daily value (30-days) (Rs mn) 24.0
SHAREHOLDING PATTERN
PERFORMANCE VIS--VIS MARKET
Returns
1-m 3-m 6-m 12-meClerx -6% -5% 1% 27%
NIFTY 2% 3% -6% -10%
ANALYTICAL CONTACTChetan Majithia (Head)
[email protected]
Chinmay Sapre [email protected]
Suresh Guruprasad [email protected]
Client servicing desk
+91 22 3342 3561 [email protected]
1 2 3 4 5
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Valuation Grade
FundamentalGrade
Poor
Fundamentals
Excellent
Fundamentals
S
trong
Do
wnside
S
trong
U
pside
59.4% 59.3% 55.1% 54.8%
17.1% 20.0% 24.5% 24.5%
9.2%8.2% 9.1% 9.5%
14.4% 12.5% 11.3% 11.2%
0%
10%
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30%
40%
50%
60%
70%
80%
90%
100%
Dec-10 Mar-11 Jun-11 Sep-11
Promoter FII DII Others
