Shares of Birlasoft were under the spotlight on Tuesday as the stock rose about 9 percent after the IT software and consulting firm reported a strong performance in the period ended on March 31, 2023. The company also announced a dividend along with its quarterly earnings.Birlasoft returned to black on a sequential basis (QoQ) as the company reported a net profit at Rs 112.17 crore in the March 2023 quarter, which was a net loss of Rs 16.36 crore in the December 2022 quarter. The company clocked a bottomline of Rs 132.9 crore in the March 2022 quarter.
The CK Birla-group company reported a 11 percent year-on-year (YoY) rise in the revenue from operations at Rs 1,226.39 crore in the fourth quarter of the fiscal year 2022-23. It had clocked a revenue from operations at Rs 1,101.44 crore in the year ago period. Its revenue stood at Rs 1,221.89 crore in the preceding quarter.Shares of Birlasoft surged about 9 percent to Rs 313.40 on Tuesday and its market capitalization topped Rs 8,500 crore mark. However, the stock was seen at Rs 312.75 at 12.35 pm. The stock had settled at Rs 287.85 on BSE on Monday.Other than quarterly earnings, the company board of Birlasoft has announced a final dividend of Rs 2 per equity shares against each share with a face value of Rs 2 each, a 100 percent yield. However, this is subject to approval from the shareholders of the company.
Brokerage firms, majorly, are positive on the stock after March results and suggest to buy it with an upside potential of up to 22 percent from its previous close. However, the recent rally in the stock on Tuesday trimmed the gains and the stock had hit the target price of a few counters.Birlasoft in 4QFY23 reported in line growth with improved profitability. EBIT margin came in at 11.9 percent, with 70 bps QoQ expansion, higher than estimates, said B&K Securities. “The company had embarked on a journey of restructuring on vertical lines. This is largely complete with new hires and internal promotions. Vertical-wise heads are in place,” it said.“New COO and CGO shall be in place. Deal win momentum continued to remain strong, while renewals came in strong at $172 million, a growth of 77.3 percent YoY. There are deal wins but risks of run-off continue. Macro challenges exist but strong pipeline should assuage concerns,” it added with a buy rating and a target price of Rs 350 on the stock.
Birlasoft has posted results better than our expectation on all fronts. Going ahead with its organization restructure plan, one-time settlement with Invacare now behind as well as strong order book and abating attrition bodes well for the overall growth, said Religare Broking which remains positive on the stock with a buy rating and a target price of Rs 341.“Apart, demand and strong orders will be driven by the American region along with its transformation and ERP business as well as strong bounce back is expected from manufacturing, BFSI and life science verticals. In the near term along with other IT companies, Birlasoft as well would face some challenges because of uncertainty and macro challenges in global markets,” it added.Birlasoft reported 3 percent CC growth in dollar revenues (excluding Invacare), better than peers. It is taking the right step to turn around the business-like focus on delivery, clients, investment in sales and hiring of leaders to drive vertical growth, said IDBI Capital which expects it to register QoQ growth in coming quarters led by BFSI, bottoming of ERP business and healthy H2FY24E.
However, we have conservatively assumed 6.5 percent YoY growth in revenues due to macro uncertainty, project run offs and Invacare base. The company also aspires to reach 15-16 percent EBITDA margins in coming quarters. We have built in a 14.5 percent EBITDA margins for FY24E We have kept our estimates unchanged, it added with a ‘buy’ tag and a target of Rs 340.Seasoned investors and Dalal Street veteran Ashish Dhawan held 27,64,615 shares, or 1.01 percent stake, in Birlasoft as of March 31, 2023, the latest shareholding pattern of the company suggests. His holding in the company is worth Rs 86.65 crore.
Birlasoft reported solid Q4FY23 results as revenue at $149.1 million grew 3.1 percent QoQ in CC, beating our estimate of 2.5 percent CC QoQ growth. EBIT margin expanded by 70bp QoQ to 11.9 percent, higher than our forecast. At Rs 112 crore, PAT too beat our estimate of Rs 99.3 crore, said Nuvama Institutional Equities.
New CEO is restructuring BSOFT by cutting tail accounts to focus on key clients, changing the organizational structure and improving the leadership bench. This is indeed positive, but shall take time to translate to earnings growth. It revised its EPS expectations lower growth and higher margins and maintained a hold with a revised target price of Rs 300.
