eClerx Services Records 45% in 3 Days, Reaches New High After Fourth Quarter Results


Shares of eClerx Services continued their bullish movement and hit a new high of Rs 1,875 after rising 16% on BSE in intraday trading on Monday, amid high volumes, in an otherwise subdued market. In the past three days, the stock has risen 45% after the company reported healthy numbers for the March quarter (T4FY21) with revenue up 19.3% quarter-on-quarter (QoT) in terms constant currencies and 19.7% QoQ in published terms. The share broke its previous record of Rs 1,775, reached in August 2016.

At 10:52 a.m., eClerx Services was trading 13% higher at Rs 1,831 on BSE, compared to 0.40% lower in S&P BSE Sensex. Over-the-counter trading volumes increased fivefold with a total of 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 companies, including some of the world’s largest financial services, communications, retail, fashion, media and entertainment, manufacturing, travel and leisure and technology.

As of Q4FY21, the company’s after-tax profit increased 39% QoQ to Rs 98.8 crore. EBIT (earnings before interest and tax) margins improved 295 basis points (bps) to 27.6 percent, mainly due to lower selling and development costs and higher gross margins. The company said the total delivery headcount as of March 31, 2021 was 11,831, a 40% year-over-year increase.

The company, during the quarter, experienced healthy expansion in its EBIT margin due to healthy demand, lower installation and travel costs and weaker incentives. eClerx plans to grant salary increases starting in April 2021. This, along with the resumption of travel and rising installation costs, can hurt margins. However, with revenue growth and the full impact of increased costs visible in fiscal 23E, we expect fiscal 22E margins to improve 146 basis points year-on-year to 31, 2%, then will decline to 29.7% in fiscal 23E, said Devang Bhatt, analyst at ICICI Direct in the earnings update.

Given the positive demand environment for digital services, double-digit organic growth outlook for FY22, EBIT margin guidance of over 25% (despite the expected salary increase in Q1 of FY22) and better offshore delivery, BOBCAPS analysts have raised REDUCE’s action to BUY.

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