Buy Birlasoft: target of Rs 222: Sharekhan

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Sharekhan's research repor on Birlasoft

Birlasoft eyes a bounceback in Q3FY2021 despite lower billable days, driven by ramp-up large deals, reversal of price discounts and revenue contribution from a transformational deal. Manufacturing vertical would continue its growth momentum in Q3, while energy and utilities vertical (down 7.1% q-o-q in Q2) is expected to bounce back; lifesciences vertical likely to recover in Q4FY2021. Management indicated that it aims to scale up Microsoft cloud business to $100 million in the next couple of years from current level of $20-25 million; expect to achieve 15% EBITDA margin in Q1FY2022.

Outlook

We recommend a Buy on Birlasoft Ltd with a price target (PT) of Rs. 222 as it trades at a significant discount to peers. Cash and cash equivalents account for 18% of market capitalization.

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