Birlasoft: Will this Ashish Dhawan stock deliver big in Q3?

Birlasoft is likely to report a mixed set of numbers for the December quarter. Margins may remain under pressure while the performance of a few verticals may be muted, brokerage previews suggest.

The IT firm may report a double-digit growth in year-on-year (YoY) sales. Profit may rise in single digit, analysts said. On a quarter-on-quarter (QoQ) basis, the company is likely to report flattish performance.

Seasoned investor Ashish Dhawan held 27,64,615 shares, or 1.02 per cent stake, in the smallcap IT player as of September 30, 2022. The IT firm is yet to report its December quarter shareholding pattern.

Emkay Global expects Birlasoft to Rs 1,234 crore in sales, up 15.10 per cent YoY and 3.50 per cent QoQ.

It sees profit for Birlasoft at Rs 125 crore, up 9.7 per cent YoY and 8.6 per cent QoQ. Ebitda is seen at Rs 187.6 crore. Margins is seen expanding 41 basis points (bps) sequentially to 15.20 per cent on account of operational efficiencies and a weak rupee.

"We expect 0.8 per cent QoQ dollar revenue growth after considering 10 bps cross-currency headwinds," Emkay said.

"Leadership transition and growth strategy, order wins, deal pipeline, FY23 revenue growth and margin outlook, demand trends and attrition will be key factors to watch out for," it added.

Nuvama Research pegs revenue for Birlasoft at Rs 1,225.40 crore, up 14.30 per cent YoY. Net profit is seen rising 4 per cent to Rs 118.7 crore. EBIT is seen at Rs 148.30 crore with EBIT margins are expected to contract 133 bps.

"Life science vertical is expected to remain a drag and margin is likely to decline due to wage hikes and travel costs," it added. "We would keenly watch out for management commentary on hyperscalers partnerships and updates on management change."

B&K Securities believes that the company can report a revenue of Rs 1,215.80 crore, rising 13.40 per cent YoY and 2 per cent QoQ, whereas profit is seen at Rs 117.40 crore, 3 per cent up YoY and 2.10 per cent QoQ.

Ebitda is een at Rs 178.70 crore, rising 9.70 per cent YoY and 1.30 per cent QoQ, with margins at 14.70 per cent, it said. "Demand looks strong, as of now, but now clients are getting cautious about the macro uncertainties; hence, they are watchful towards the IT spend."

Clients are not only taking a longer time to start the project, but they are also taking longer to finish the project and hence delaying the revenue booking. Clients are extending the project timeline to better manage the cash outflow, B&K added.

Another domestic brokerage firm Arihant Capital sees flattish growth in revenue in Q3FY23E due to high furlough. Margin should see a decline of 70-80 bps due to the last leg of the wage hike and also some hiring on the top management front. Life science is sluggish due to 1-2 client drops, it said.

"We are expecting weaker Q3FY23E due to high furlough and the last leg of wage hike but should see the strongest Q4FY23 led by a decent deal," it added. "We are expecting 10-11 per cent growth in FY23E. We have a 'buy' rating on the stock with a target price of Rs 429."

Meanwhile, Chandrasekar Thyagarajan offered his resignation from Birlasoft from its post of chief financial officer (CFO) on Monday, January 2, 2023, the company told the exchanges.

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