ICICI Direct: eClerx Services’ Revenue Continues To Decelerate
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ICICI Direct Report
eClerx Services Ltd. dollar revenues declined 6.0% QoQ mainly due to supply and demand side challenges. However, Ebit margins increased 280 basis points QoQ to 19.6% mainly led by lower travel and marketing expenses.
The company expects a gradual increase in revenues. However, it expects margins to remain volatile due to wage hikes in Q2 and Q3 and return to office costs. The company has completed buyback of Rs 109.5 crore.
In the current quarter, eClerx Services witnessed demand and supply side challenges. However, we believe the company could see improving revenue growth in coming quarters led by receding supply side challenges and improving demand.
eClerx Services also witnessed healthy deal wins upwards of a quarter million dollars. A few deal wins include a Nordic banking client, food business client and higher wins from existing clients.
In addition, the company expects CLX Europe business (that we believe contributes 18% to top line) to see improvement in coming quarters.
Hence, we expect eClerx Services to witness a gradual improvement in revenues in coming quarters. However, a significant dip in Q1 FY21 revenues and possibility of roll offs in subsequent quarters prompt us to build a conservative estimate of 8.4% YoY decline in FY21E revenues.
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