Target: ₹341
CMP: ₹275.30
Birlasoft reported revenue growth of 3.5 per cent y-o-y and decline of 0.3 per cent q-o-q to $148.4 million, while its revenue in rupee was at ₹1,221.9 crore, up 14 per cent y-o-y and 2.5 per cent q-o-q. The growth was mainly driven by strong demand for technology transformation and cloud services businesses, while muted performance was seen in its enterprise solution business which impacted the growth.
In the near term, the management believes the performance will remain impacted due to bankruptcy filed by one of its clients and macro headwinds.
However, going ahead the revenue growth is expected to be driven by improvement in deal pipeline for cloud and technology business, continued momentum in BFSI and pick-up in demand from manufacturing and also uptick in deals from Europe and America region as well as focus on managing cost will aid in improving operating performance.
On the financial front, we incorporated Q3 provisions made by the company as well as near-term challenges; however, long-term growth outlook may improve. Thus, we revise our target price downwards to ₹341, valuing the company at 14x PE multiple on FY25 EPS basis.