eClerx Services rallies 45% in 3 days, hits new high post Q4 results

The company reported healthy March quarter numbers with revenues up 19.3 per cent QoQ in constant currency terms and 19.7 per cent QoQ in reported terms

Shares of eClerx Services continued their upward movement and hit a new high of Rs 1,875 after rallying 16 per cent on the BSE in intra-day trade on Monday, on the back of heavy volumes, in an otherwise subdued market. In the past three days, the stock has zoomed 45 per cent after the company reported healthy March quarter numbers (Q4FY21) with revenues up 19.3 per cent quarter on quarter (QoQ) in constant currency terms and 19.7 per cent QoQ in reported terms. The stock surpassed its previous high of Rs 1,775, hit on August 2016.

At 10:52 am, eClerx Services was trading 13 per cent higher at Rs 1,831 on the BSE, as compared to 0.40 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped over five-fold with a combined around 520,000 shares changing hands on the NSE and BSE.

eClerx 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.

In Q4FY21, the company’s profit after tax grew 39 per cent QoQ at Rs 98.8 crore. EBIT (earnings before interest and tax) margins improved 295 basis points (bps) to 27.6 per cent mainly led by lower sales & development expenses and higher gross margins. The company said total delivery headcount as of March 31, 2021 stands at 11,831 – an increase of 40 per cent year on year.

The company, in the quarter, witnessed healthy EBIT margin expansion due to healthy demand, lower facility & travel cost and lower incentives. eClerx plans to give wage hikes effective April 2021. This, coupled with resumption of travel and increase in facility cost may act as a headwind to margins. However, with revenue growth and full impact of increase in cost to be visible in FY23E, we expect FY22E margins to improve 146 bps YoY to 31.2 per cent and then taper to 29.7 per cent in FY23E, Devang Bhatt, analyst at ICICI Direct said in result update.

Given the positive demand environment for digital services, double-digit organic growth outlook for FY22, EBIT margin guidance of >25 per cent (despite wage hike due in Q1FY22) and better offshore delivery, analysts at BOBCAPS upgraded the stock from REDUCE to BUY.