Emudhra Ltd is seeing strong performance. Demand environment is strong. Buy for target price of Rs 556 (Yes Securities

Emudhra Ltd

Strong performance led by expansion of the Enterprise business in foreign markets

Result Synopsis

Emudhra (EMUDHRA) reported inline financial performance for the quarter. The sequential revenue growth and EBITDA margin for the quarter were as per estimates. It reported sequential revenue growth of 20.8% QoQ, led by Trust Services (up 48.2% QoQ) and Enterprise solutions (up 10.6% QoQ). The Enterprise segment continues to maintain robust growth trajectory led by strong traction in Middle East, the US and APAC. 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 has returned to normal growth trajectory. EBITDA margin for the quarter declined by 47 bps QoQ to 29.3% for the quarter on account of higher operational expenses incurred in expanding its presence in the foreign markets of the US and Europe.

The demand environment remains strong led by rising digitalization 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 CAGR of 45.8% over FY23‐25E with average EBITDA margin of 31.1%. We maintain our BUY rating on the stock with revised target price of Rs 556/share at 37x on FY25E EPS. The stock trades at PER of 46.6x/30.4x on FY24E/FY25E EPS

Result Highlights

▪ Reported revenue of Rs 963.0mn (up 20.8% QoQ, up 64.6% YoY). The sequential growth was led by 10.6% QoQ increase in Enterprise business, while its Trust Services revenue grew by 48.2% QoQ.

▪ EBITDA margin declined by 47 bps QoQ to 29.3% for the quarter, led by higher operating expenses (up 25.0% QoQ to Rs 241 mn).

▪ Enterprise Revenue split between India and International is 55:45. Enterprise revenue split between Cyber Security and Paperless is 74:26.

▪ Trust service revenue split between channel and retail is 70:30. ▪ PAT increased by 14.6% QoQ to Rs 187.6mn.