Birlasoft shares climb 7% amid high volume, up for 3rd day. What analysts say

Shares of Birlasoft gained 7 per cent in Tuesday's session amid high volumes, taking its winning run to the third session. A host of brokerages have suggested share price targets in the range of Rs 300-400 on the stock post the IT major post its March quarter results. Analysts said Birlasoft struggled on the growth front in the previous last two quarters but recovered sharply in Q4, on strong growth in the US and in key verticals. While the management commentary was a bit cautious, the scrip has jumped 27 per cent in the last one month.

On Tuesday, the stock climbed 7.49 per cent to hit a high of Rs 331.85 on BSE. This was the third day of rise for the stock. Seasoned investor Ashish Dhawan held 1.01 per cent stake in the company as of March 31.

Nuvama Institutional Equities said the new CEO is restructuring Birlasoft by cutting tail accounts to focus on key clients, changing the organisational structure and improving leadership bench.

This , it said, is indeed positive but shall take time to translate to earnings growth.

"We expect Birlasoft to underperform in the near-to-medium term due to organisational changes, Invacare bankruptcy and relative weak capabilities in cost take-out deals, which are expected to dominate during an economic downturn. Inexpensive valuations limit the downside potential," it said.

ICICI Securities said changes in the management, organisation restructuring, hiring of new vertical leaders are likely to help recover revenue growth momentum. It said revenue growth is expected to be achieved via client mining, cross sell, annuity & multi-year deals, expansion in Europe & APAC and focus on niche verticals. It sees rupee revenue for Birlasoft to grow at 8.3 per cent CAGR over FY23-25E. It sees Ebitda margin to be at 16.1 per cent by FY25E on the back of easing of supply side challenges and higher utilisation.

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