“Despite strong Q1CY18 and strong visibility of demand, the management refrained from revisiting its guidance upwards (guided for 10-12% growth in CY18) given the lower visibility on client spends,” analysts at Emkay Global Financial Services said in result update.
It expects strong Q2CY18 given the seasonality factor and may review the annual guidance only post Q2CY18 earnings given the continued caution in client spends. We have factored in robust revenue/earnings CAGR of 10%/11% over CY17-20E. However, the current valuation discounts these positives adequately, the brokerage firm said.
“With strong start to CY18 and stronger growth in Q2 and Q3 the company not upping its revenue guidance comes as a surprise and raises questions on continued growth momentum. Company has guided for investments in sales & marketing which would result in margins being under pressure in CY18. Company is still guiding for 10%-12% EPS growth in CY18, despite the likely benefits from currency depreciation,” analysts at Antique Stock Broking said in result review.
With strong start to CY18 and stronger revenue momentum to follow, not raising guidance seems a bit surprising. We retain HOLD with a target price of Rs 370 (based on 18x CY19) stock is trading at rich valuations of 21.7x CY19e EPS which we believe more than captures any positives, added report.
At 09:52 am; the stock was trading 8% lower at Rs 414 on the BSE, as compared to 0.27% decline in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 3.53 million shares changed hands on the NSE and BSE so far.
Thus far in the calendar year 2018, the stock had outperformed the market by surging 33% against 3% rise in the benchmark index till Thursday.