eClerx Ltd - emkay
Quality play all set for the next league
BUY
CMP: Rs 391 Target Price: Rs 500
We initiate coverage on eClerx with a 'BUY' rating and a March'11 price target of Rs 500. We believe that its niche positioning in the KPO space, ability to use BPO skill sets along with technology to perform the more complex KPO functions and presence in scalable KPO segments make it a strong beneficiary of the growth in the data analytics space. Moreover, the company's long term investment strategy- 1) Setting up a 900 seater in the Pune SEZ and 2) Using the downturn to strengthen their managerial team – is likely to sustain its growth momentum . We estimate a revenue, EBITDA and net profit CAGR of 22.3%, 16.4% and 21.6% respectively over FY09-12E. Valuations at ~8x FY11E P/E remain attractive, given its ROE of 35%+ and cash/share of ~Rs 62. Our March'11 price target of Rs 500 is bas ed on 9x 1 yr rolling forward P/E multiple. Key downside risks to our ratings are macro headwinds (akin to CY08) and unfavourable exchange rate movements.
Management lies in dropping the last alphabet: manage – men. still better, drop one more alphabet: manage – me.
Samir Kumar Shah.
9830405060
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