eClerx Services delivering on margins lifts stock 7%; analysts raise concerns

eClerx Services on May 25 reported a 17.1 percent year-on-year (YoY) increase in net profit at Rs 488.8 crore for the fourth quarter that ended March 31, 2023. As of 10.20 am, the stock traded up 6.74 percent at Rs 1503 on BSE.

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Shares of eClerx Services Limited spiked on May 26 after the company reported strong year on year growth in revenue and profits. However, sequentially, growth was muted amid slowdown in demand.

As of 10.20 am, the stock traded up 6.74 percent at Rs 1503 on BSE.

eClerx Services on May 25 reported a 17.1 percent year-on-year (YoY) increase in net profit at Rs 488.8 crore for the fourth quarter that ended March 31, 2023. Its total revenue stood at Rs 2,713.7 crore, up 24.2 percent from the corresponding period of the preceding fiscal.

EBIT margin came in at 25.8 percent, improving by 44 basis points, despite general slowdown in the industry.

Analysts said the performance on margins was satisfactory as they ended at the middle of the guided band compared to their guidance of ending at lower end, which might be the reason behind the sharp rise in stock price.

ICICIdirect noted that the company had indicated in Q3 that they were expecting some softness in the near term and it is playing out now. The brokerage said the performance of top 10 customers (59 percent of revenue mix) is the key where the weak performance continues for a couple of quarters now (8.6 percent YoY growth in Q4FY23 vs average >20 percent growth in last few quarters).

“Similar pattern is visible for top 5 customer’s performance (40 percent of mix) where the pick is critical for better growth ahead,” the analyst added.

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