Emkay Global Initiates Coverage on eClerx Services with a Buy Recommendation, Target Price Set at Rs 1800
Emkay Global Financial Maintains Buy Rating for eClerx Services
Emkay Global Financial has released a research report on eClerx Services, highlighting the company's Q4 performance. eClerx posted soft operating performance in the quarter, with revenue growing 0.5% quarter-over-quarter (QoQ) on a constant currency (CC) basis, which fell short of the research firm's expectations.
The company's earnings before interest, taxes, and amortization (EBITM) declined by approximately 40 basis points (bps) QoQ to 21.1%, primarily due to higher hiring and travel costs. However, this was partially offset by lower general and administrative (G&A) and sales and distribution (S&D) expenses. eClerx's new deal annual contract value (ACV) remained healthy at $46.1 million in Q4, with a year-over-year (YoY) growth of approximately 24% on a trailing 12-month (TTM) basis.
The company's automation and analytics segment has scaled to $90 million and is expected to outpace overall company growth, emerging as a key structural growth driver. In Q4, eClerx secured its first large-scale agentic AI win, with deployment set to begin in Q1 FY27. The company has aspirations for YoY growth in bookings for FY27. Management expects Q1 FY27 to be sequentially better than Q4 FY26 and aims to deliver top-quartile revenue growth in FY27 on the back of order booking and pipeline strength.
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| Metric | Q4 FY26 | FY27E | FY28E |
|---|---|---|---|
| Revenue Growth | 0.5% QoQ CC | ||
| EBITM | 21.1% | ||
| New Deal ACV | $46.1 million | ||
| Automation and Analytics Segment | $90 million |
Emkay Global Financial has retained its BUY rating and target price of Rs 1,800, based on 18x March 28 EPS. The research firm has tweaked its FY27E and FY28E earnings per share (EPS) estimates by approximately 1%, factoring in Q4 performance.
Investor Takeaway
Investors should be cautious about eClerx Services' soft operating performance and lower than expected revenue growth.
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