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Yes Securities Report
Emudhra Ltd. reported mixed financial performance for the quarter. The sequential revenue growth and Ebitda margin for the quarter was slightly below estimates. It reported sequential revenue growth of 3.8% QoQ, led by Trust Services( down 1.9% QoQ) and Enterprise solutions (up 6.3% QoQ).
The enterprise segment continues to maintain robust growth trajectory led by strong traction in Middle East, the U.S. and Asia Pacific.
The international revenue mix continues to increase led by the expansion of Enterprise business in foreign markets. The pricing pressure in the Trust services business is largely over and the segment is expected to resume normal growth from Q2 FY24.
Emudhra's Ebitda margin for the quarter declined by 113 basis points QoQ to 29.8% for the quarter on account of higher operational expenses incurred in expanding its presence in the foreign markets of the U.S. and Europe.
The demand environment remains strong led by rising digitalisation across sectors. We expect enterprise segment to grow faster than Trust Services, driving the overall growth of the company. Its strong portfolio of enterprise solutions and deep relationships with system integrators should help to drive the Enterprise business.
The Ebitda margin is expected to improve in medium term going ahead led by positive operating leverage.
We estimate revenue compound annual growth rate of 43.5% over FY23‐25E with average Ebitda margin of 33.5%.
We maintain our 'Buy' rating on the stock with revised target price of Rs 552/share at 33 times on FY25E earnings per share.
The stock trades at price-to-earning ratio of 42.8 times/27.0 times on FY24E/FY25E EPS.
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