Emkay Global Gives A Buy On This Small Cap IT Stock, Rallied by 420.56% In 3-Years

The share price of Eclerx Services Limited has surged sharply by a whopping 420.56% in last three years. Recently even a leading brokerage firm has given a buy on this stock as it feels the price ould increase further by nearly 20.85%. Given below are the details.

The analyst of Emkay Global visited the CFO of Eclerx services and got insights on companys demand environment and outlook. As per the management team there would be slight delay in certain client deal renewals and would be watchful of macro conditions.

Besides, the report mentioned that the, "Company has no direct exposure to troubled US regional banks and its exposure to overall US regional banks remains limited. However, eClerx remains exposed to large global banks as well as to investment banks."

Mangement gave a guidance that, "it expects adjusted EBITDAM (including other income) to remain at the lower half of the guided range of 28-32% for FY23. Company currently operates at 45-50% WFO and expects no material margin impact, with SEZ rules being relaxed till end-CY23."

The company's top-10 clients contributed 59% of the revenue in Q3FY23, and eClerx is making a conscious effort to diversify the business from top clients (non-Top 10 clients saw roughly 20% CAGR in the last 5 years; while roughly 3x of top-10 growth), was noted by Emkay Global.

In terms of risk and outlook Emkay Global reported that Eclerx would encounter some challenges in near term, but is a good buy and the valuations are reasonable. "Near-term revenue growth is likely to be muted amid macro uncertainties and weakness in Digital.Client concentration and potential roll-offs remain risks; however, growth challenges would be short-lived, as medium-term demand drivers remain intact. We have rolled forward our TP to Mar-25E EPS and raised our FY23E-25E EPS by 1.6%-6%, factoring-in the 9MFY23 performance and increasing the INR/USD assumption to 79.9 vs 78.0 for FY23. We maintain BUY on the stock, with a target price of Rs 1,675 per share at 14x Mar-25E EPS, considering reasonable valuations.

About Eclerx Services Limited
Eclerx Services Limited is a small cap IT company that provides business process management, automation and analytics services to a number of Fortune 2000 enterprises, including some of the world's leading financial services, communications, retail, fashion, media & entertainment, manufacturing, travel & leisure, and technology companies. The company was founded in 2000 and got listed on the sctock exchange in the year 2007. Its current market capitalisation is Rs 6,485.81 crore.

Eclerx Share Price performance
In last one year the share price of the small cap company has fallen by 13.04%, but in last three years it has grown rapidly by 420.56% to latest closing price of Rs 1322. 95 per share. The latest closing price was down by 2.27% on intraday basis. Its 52-week high is at Rs 1,707.52per share and 52-week low is at Rs 1,223.95 per share.

Disclaimer:

The stock has been picked from the brokerage report of Emkay Global, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.