BUY CMP 1677.00 Target Price 1880.00 ECLERX SERVICES LIMITED (CONSOLIDATED) Result Update: Q1 FY16 SEPTEMBER 2 nd, 2015 ISIN: INE738I01010 Index Details Stock Data Sector IT & ITes BSE Code 532927 Face Value 10.00 52wk. High / Low (Rs.) 1800.00/1172.30 Volume (2wk. Avg. Q.) 2962 Market Cap (Rs. in mn.) 50967.38 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 9421.20 10966.28 12337.06 EBITDA 3479.57 4080.90 4603.46 Net Profit 2296.77 2645.73 2984.76 EPS 75.67 87.05 98.21 P/E 22.16 19.26 17.08 Shareholding Pattern (%) (QUARTERLY) As on Jun-15 As on Mar-15 PROMOTER 52.35 52.42 FIIs 26.92 27.19 DIIs 12.19 11.62 OTHERS 8.54 8.77 1 Year Comparative Graph ECLERX SERVICES LIMITED BSE SENSEX SYNOPSIS Eclerx Services Ltd provides data analytics and customized process solutions to global enterprise clients from its offshore delivery centres in India. The company s net sales grew by 37.22% y-o-y in Q1 FY16 and stood at Rs. 2982.88 million against Rs. 2173.81 million in the corresponding quarter last year. For Q1 FY16, the company s net profit Jumps to 37.15% y-o-y of Rs. 732.39 million as against Rs. 534.01 million for the Q1 FY15. Other income Jumps to Rs. 159.11 million in Q1 FY16 from Rs. 9.31 million in Q1 FY15. And is debt free company. Operating profit of the company rose by 42.43% to Rs. 1152.23 million in Q1 FY16 from Rs. 808.97 million in Q1 FY15. The company has reported an EPS of Rs. 24.10 for the 1st quarter of FY16 as against an EPS of Rs. 17.63 in the corresponding quarter of the previous year. Profit before tax (PBT) at Rs. 1049.77 million in Q1 FY16 compared to Rs. 703.71 million in Q1 FY15, registered a growth of 49.18% y-o-y. The company has acquired the entire shareholding of CLX Europe S.P.A a joint stock company based in Italy effective April 22, 2015 through its overseas subsidiary eclerx Investments (Uk) Ltd for a consideration of Euro 175.73 Lac. Net Sales and PAT of the company are expected to grow at a CAGR of 17% & 15% over 2014 to 2017E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Eclerx Services Ltd 1677.00 50967.38 75.65 22.16 7.12 350.00 Vakrangee Software Ltd 107.85 57069.60 6.25 17.26 5.70 25.00 Hinduja Global Solutions Ltd 426.00 8829.10 71.74 5.94 0.55 200.00 AXISCADES Engineering Tech Ltd 272.40 7406.40 8.07 33.75 5.91 0.00
QUARTERLY HIGHLIGHTS (CONSOLIDATED) Results updates- Q1 FY16, Eclerx Services Ltd. India s first publicly-listed KPO and a Forbes 200 Best under a Billion the company provides data analytics and customized process solutions to global enterprise clients from its offshore delivery centers in India, has reported its financial results for the quarter ended 30 th June, 2015. Rs. In million June-15 June-14 % Change Net Sales 2982.88 2173.81 37.22 PAT 732.39 534.01 37.15 EPS 24.10 17.63 36.68 EBITDA 1152.23 808.97 42.43 The company has achieved a turnover of Rs. 2982.88 million, increase of 37.22% y-o-y for the 1 st quarter of the financial year 2016 as against Rs. 2173.81 million in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 1152.23 million in Q1 FY16 as against Rs. 808.97 million in Q1 FY15. Net profit rose by 37.15% y-o-y of Rs. 732.39 million against Rs. 534.01 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 24.10 for the 1 st quarter of FY16 as against an EPS of Rs. 17.63 in the corresponding quarter of the previous year. Break up of Expenditure: Break up of Expenditure (Rs. In million) Q1 FY16 Q1 FY15 Chg % Employee Benefit Expenses Depreciation & Amortization Expense 1376.62 985.34 40% 102.46 105.26-3% Other Expenditure 501.55 365.83 37% Cost of technical subcontractor 111.6 22.99 385%
COMPANY PROFILE eclerx Services Limited ( eclerx ), founded in 2000 and publicly listed on both the Bombay and National Stock Exchanges in India since 2007, is a leading knowledge process outsourcing ( KPO ) company providing middle/back office operations support to over 30 Fortune 500 companies and headquartered in Mumbai, India. eclerx is a Knowledge and Business Process Outsourcing ( KPO / BPO ) company providing operational support, data management, and analytics solutions to over 50 Global Fortune 1000 clients and provides data analytics and customized process solutions to global enterprise clients from its offshore delivery centers in India. The company s five delivery centers across India support a diverse global client base, including the world s leading Financial Services, Broadband, Cable & Telco, ecommerce & Retail, High Tech, Industrial Manufacturing & Distribution, Software, Media & Entertainment and Travel companies and delivery centers based in Mumbai, Pune and Chandigarh. Client relationship offices are located in New York, San Francisco, Chicago, Austin, Philadelphia, London, Dublin and Singapore. PD and Anjan are majority shareholders in eclerx and are actively involved in the strategic direction of the Company along with the executive management team. Infrastructure In India, eclerx Services Limited has 3 main delivery centers viz. Mumbai, Pune and Chandigarh with a total capacity of approximately 7,500 seats operating at approximately 90% utilisation. The company has 4 sales offices across 3 countries. During the year, the company received approval for six additional new facilities in at Airoli, Navi Mumbai, Pune and Chandigarh. Out of these three facilities at Airoli and Navi Mumbai are currently operational. The remaining 1 unit each in Airoli, Navi Mumbai, Pune and Chandigarh is likely to go into production early in Financial Year 2015-16 and will accommodate approximately 1,400 seats. Once operational, this will take its total seat count to about 8900. Business activities Retail & etail High Tech Travel & Leisure Software Industrial Manufacturing Broadband, Cable & Telco Retail Financial Services Financial Services Financial Services Reference Data Management Risk and Control
Middle Office Services Back Office Services Finance and Accounting Ancillary Services Asset Class Coverage All Financial Services Sales & Marketing Services Commerce & Content Data Management Analytics, Insights & Reporting All Sales & Marketing Service Subsidiary Companies eclerx Investments Limited (BVI) eclerx LLC (USA) eclerx Limited (UK) eclerx Private Limited (Singapore) Agilyst Inc (USA) Agilyst Consulting Private Limited, (India)
FINANCIAL HIGHLIGHT (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, 2014-2017E I. EQUITY AND LIABILITIES A) Shareholder's Funds: ECLERX SERVICES LIMITED FY-14A FY-15A FY-16E FY-17E a) Share Capital 301.77 303.51 303.92 303.92 b) Reserves and Surplus 5587.75 6845.18 8077.32 9369.70 Sub -Total- Shareholder fund 5889.52 7148.69 8381.24 9673.62 B) Share application Money pending Allotment 0.00 1.35 0.00 0.00 C) Non Current Liabilities: a) Deferred Tax Liability 18.75 18.12 20.11 22.73 b) Other Non Current Liabilities 96.63 104.08 110.32 115.84 c) Long Term Provisions 69.43 110.49 138.11 162.97 Sub-Total Non Current Liabilities 184.81 232.69 268.55 301.54 D) Current Liabilities: a) Trade Payables 10.86 17.17 21.98 25.27 b) Other Current Liabilities 236.00 353.98 431.86 475.04 c) Short Term Provisions 1592.56 1837.81 2058.35 2223.01 Sub-Total - Current Liabilities 1839.42 2208.96 2512.18 2723.33 TOTAL EQUITY AND LIABILITIES (A+B+C+D) 7913.75 9591.69 11161.98 12698.49 II. ASSETS E) Non- Current Assets: Fixed Assets i. Tangible Assets 558.04 695.09 834.11 959.22 ii. Intangible Assets 989.62 975.26 1000.62 1020.63 iii. Capital work in Progress 10.76 11.49 12.17 12.78 a) Sub-Total - Fixed Assets 1558.42 1681.84 1846.90 1992.63 b) Deferred Tax Assets 37.06 69.74 87.18 106.36 c) Long Term Loans & Advances 637.11 650.22 682.73 710.04 Sub -Total- Non- Current Assets 2232.59 2401.80 2616.81 2809.03 F) Current Assets: a) Current Investment 1154.79 1552.87 1894.50 2235.51 b) Trade Receivables 987.26 1261.39 1538.90 1831.29 c) Cash & Cash Equivalents 2405.57 2865.75 3238.30 3570.44 d) Short- Term Loans and Advances 80.50 151.16 202.24 246.74 e) Other Current Assets 1053.04 1358.72 1671.23 2005.48 Sub -Total Current Assets 5681.16 7189.89 8545.17 9889.46 TOTAL ASSETS (E+F) 7913.75 9591.69 11161.98 12698.49
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 8409.94 9421.20 10966.28 12337.06 Other Income 110.20 323.53 577.18 692.61 Total Income 8520.14 9744.73 11543.45 13029.67 Expenditure -4874.16-6265.16-7462.55-8426.21 Operating Profit 3645.98 3479.57 4080.90 4603.46 Interest 0.00 0.00 0.00 0.00 Gross profit 3645.98 3479.57 4080.90 4603.46 Depreciation -330.28-500.22-513.23-564.55 Profit Before Tax 3315.70 2979.35 3567.68 4038.91 Tax -759.14-682.58-920.46-1054.16 Profit After Tax 2556.56 2296.77 2647.22 2984.76 Minority Interest 0.00 0.00-1.49 0.00 Net Profit 2556.56 2296.77 2645.73 2984.76 Equity capital 301.77 303.51 303.92 303.92 Reserves 5587.75 6845.19 8077.32 9369.70 Face value 10.00 10.00 10.00 10.00 EPS 84.72 75.67 87.05 98.21 Quarterly Profit & Loss Statement for the period of 31 DEC, 2014 to 30 SEP, 2015E Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E Description 3m 3m 3m 3m Net sales 2416.09 2513.04 2982.88 3030.61 Other income 113.77 96.53 159.11 191.73 Total Income 2529.86 2609.57 3141.99 3222.33 Expenditure -1605.01-1783.21-1989.76-2062.33 Operating profit 924.85 826.36 1152.23 1160.01 Interest 0.00 0.00 0.00 0.00 Gross profit 924.85 826.36 1152.23 1160.01 Depreciation -127.24-145.55-102.46-118.24 Profit Before Tax 797.61 680.81 1049.77 1041.77 Tax -189.57-149.00-315.89-281.07 Profit After Tax 608.04 531.81 733.88 760.70 Minority Interest 0.00 0.00-1.49 0.00 Net Profit 608.04 531.81 732.39 760.70 Equity capital 303.41 303.51 303.92 303.92 Face value 10.00 10.00 10.00 10.00 EPS 20.04 17.52 24.10 25.03
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 84.72 75.67 87.05 98.21 EBITDA Margin (%) 43.35% 36.93% 37.21% 37.31% PBT Margin (%) 39.43% 31.62% 32.53% 32.74% PAT Margin (%) 30.40% 24.38% 24.14% 24.19% P/E Ratio (x) 19.79 22.16 19.26 17.08 ROE (%) 43.41% 32.13% 31.59% 30.85% ROCE (%) 67.51% 55.67% 54.81% 53.42% EV/EBITDA (x) 12.90 13.36 11.23 9.81 Book Value (Rs.) 195.17 235.53 275.77 318.29 P/BV 8.59 7.12 6.08 5.27 Charts:
OUTLOOK AND CONCLUSION At the current market price of Rs. 1677.00, the stock P/E ratio is at 19.26 x FY16E and 17.08 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.87.05 and Rs.98.21 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 17% & 15% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 11.23 x for FY16E and 9.81 x for FY17E. Price to Book Value of the stock is expected to be at 6.08 x and 5.27 x respectively for FY16E and FY17E. We recommend BUY in this particular scrip with a target price of Rs.1880.00 for Medium to Long term investment. INDUSTRY OVERVIEW According to a report issued by National Association of Software and Services Companies (NASSCOM), the IT BPM industry clocked revenues of USD 146 billion, a growth of about 13% over last year, and an overall y-o-y addition of about USD 17 billion. The industry was a net hirer, adding about 2,30,000 employees in FY15. The BPM industry has shifted from a cost-based to a value based proposition with service providers concentrating on providing more business benefit to the client than simply reducing cost of delivery. With increase in automation and digitisation of processes, platform-based and verticalised services have increased significantly. In Financial Year 2015-16, NASSCOM expects the industry to add revenues of USD 20 billion to the existing industry revenues of USD 146 billion. Export revenues for Financial Year 2015-16 is projected to grow by 12 to 14% and reach USD 110-112 billion. Domestic revenues (including ecommerce) for the same period will grow at a rate of 15-17% percent and is expected to reach USD 55-57 billion during the year. Segment Wise Performance eclerx Services Ltd s banking and financial services business has continued to undergo a transition during Financial Year 2014-15. On the one hand, the reduced role of for its clients has led to some reduction in capital markets related revenues for the company, but this has been compensated by emerging opportunities for other services including regulatory support and reference data management. The company s digital marketing business had a good year in Financial Year 2014-15. The increasing importance of digital initiatives for its clients continues to create opportunities for the company. Apart from providing digital operations support, the company also now building out an associated digital analytics capability which would provide consolidated services to clients both from onshore and offshore locations.
The company s cable and telecom business had an exceptionally strong year in Financial Year 2014-15. As the company exit the year, this business has more than doubled in size from the time that acquired Agilyst in May 2012. Despite the uncertainty around industry consolidation which prevailed through the year, the company was successful in adding substantially to the size of this business and remains optimistic about the outlook ahead. OUTLOOK The outlook for the company remains largely similar to Financial Year 2014-15 as we do not anticipate any large changes to its demand environment. The company is focusing on refining its service offerings every year and on making the requisite investments that will enable to continue its growth journey. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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