BackIT stock hits 52-week low after Q3 results. This brokerage gives 'buy' tag
Despite reporting weak Q3 report, the IT company has managed to beat estimates on revenue generation front
PremiumStock market today: After announcement of third quarter results for current fiscal on Thursday, Birlasoft shares witnessed heavy sell off pressure in early morning deals. Birlasoft share price today opened downside and hit ₹250.25 apiece within few minutes of stock market's opening bell today, which is new 52-week low of the It major. Comparing Birlasoft share price with its 52-week high of ₹501.60 per share that it made in April 2022, the IT stock is around 50 per cent down from its 52-week high. However, Emkay Global believes that the stock may bounce bank and go up to ₹325 apiece levels in long term, delivering around 30 per cent return to its shareholders in long term.
Highlighting the reasons for dip in Birlasoft share price today, Dipeshkumar Mehta, Senior Research Analyst at Emkay Global said, "Birlasoft reported a disappointing operating performance in Q3FY23 and reported performance was further exacerbated by one-off provisions. Revenue fell 0.3% QoQ to USD148.4mn (flat CC), missed expectations, due to higher-than-usual furloughs and clients putting some projects on hold. Adjusted EBITM declined 180bps QoQ due to higher furloughs, investments in capabilities, and strengthening leadership. The exact financial impact of bankruptcy filings by Invacare remains indeterminable currently."
Emkay Global expert went on to add that Birlasoft has made a provision of Rs1.5bn against the outstanding receivables and contract assets and is taking legal advice on the matter. Invacare revenue run rate is <3% of revenue currently. Ex-Invacare, management expects operating performance in Q4 to be better than Q3 due to planned deal ramp-ups and absence of furloughs. It aspires to return to ~15% EBITDAM soon.
Giving 'buy' tag to Birlasoft shares, Dipeshkumar Mehta of Emkay Global said, "We have cut EPS estimates by 13-34% for FY23E-25E, factoring in Q3 performance and client-specific issue. The stock’s valuation remains undemanding; however, the stock’s performance hinges on clarity on the impact of Invacare, revenue growth acceleration, and margin recovery in the coming quarters. We maintain BUY with a TP of ₹325 at 16x Dec-24E EPS (earlier Rs380), considering reasonable valuation (>6% FCF yield) and anticipated turnaround in operating performance."
In Q3FY23 results announced on Thursday, Birlasoft reported loss of ₹16.36 crore against ₹115 crore profit registered by the IT company in in the July-September 2022 quarter. Birlasoft had to face various challenged in the recently ended quarter as the company went through big churn in its top management and some of its key clients had to face bankruptcy as well. Despite these challenges, Birlasoft revenue stood at ₹1,222 crore, beating the estimates by a whisker.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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