Eclerx Services demonstrates fast growth in fundamentals

27-05-2016 • About Eclerx Services ($ECLERX) • By InTwits

Eclerx Services is an attractive growth stock in BPO/KPO industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Eclerx Services showed growth in the last financial year. Eclerx Services's revenue surged on 39.5% in FY2016. The growth also happened in EBITDA of 54.2% for the same period.

In the last 3 years the company showed fast revenue growth of 25.8% from FY2013 to FY2016 annually. EBITDA surged on 23.9% from FY2013 to FY2016 annually.

Eclerx Services ($ECLERX) financials for the last 5 years

mln. INR	FY2012	FY2013	FY2014	FY2015	FY2016
Revenue	4,729	6,605	8,410	9,421	13,143
Revenue growth, %		39.7%	27.3%	12.0%	39.5%
SG&A, %
EBITDA	1,909	2,557	3,536	3,156	4,868
EBITDA growth, %		33.9%	38.3%	-10.7%	54.2%
EBITDA margin, %	40.4%	38.7%	42.0%	33.5%	37.0%
Net Income	1,598	1,716	2,557	2,297	3,630
Net Income margin, %	33.8%	26.0%	30.4%	24.4%	27.6%

CAPEX	251	267	214	614	531
CAPEX/Revenue, %	5.31%	4.05%	2.55%	6.51%	4.04%
Debt	0	0	0	0	35
Cash	1,348	1,209	2,387	1,976	3,258
Net Debt/EBITDA	-0.7x	-0.5x	-0.7x	-0.6x	-0.7x

ROIC, %	61.1%	58.7%	62.4%	41.0%	48.4%
ROE, %	55.0%	43.9%	49.8%	35.2%	40.3%

Profitability and return on investment

EBITDA growth was partly attributed to margin expansion. Eclerx Services's EBITDA margin surged on 3.50 pp from 33.5% to 37% in FY2016. In the longer period EBITDA margin decreased slightly on 1.70 pp from 38.7% in FY2013 to 37% in FY2016.

Eclerx Services shows attractive ROIC at 48.4% for the last 12 months which assumes stable development model. Three years ago it was considerably higher at 58.7%. It's average level of ROIC for the last three years was 50.6%.

Net Income margin surged on 3.20 pp from 24.4% to 27.6% in FY2016. In the longer period the company's Net Income margin increased on 1.60 pp from 26% in FY2013 to 27.6% in FY2016.

Eclerx Services operates at ROE of 40.3%. It's average ROE for the last three years was 41.8%.

Capital expenditures (CAPEX)

In FY2016 Eclerx Services had CAPEX/Revenue of 4.04%. Eclerx Services's CAPEX/Revenue showed almost no change on 0 pp from 4.05% in FY2013 to 4.04% in FY2016. Average CAPEX/Revenue for the last three years was 4.37%.

Leverage (Debt)

Eclerx Services has negative net debt at -0.7x Net Debt/EBITDA - at the same time with high growth. In the longer period the company showed fast leverage growth of 0.19x from -0.47x in FY2013 to -0.66x in FY2016.

Valuation vs. comparable companies

The market closed today at 10.5x EV/EBITDA for Eclerx Services which is 57.4% lower than 24.5x BPO/KPO peer group avearge calculated on the basis of 18 companies. The market closed today at 14.9x P/E for Eclerx Services which is 3.37% lower than 15.4x BPO/KPO peer group avearge calculated on the basis of 3 companies.

For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 11.7x EV/(EBITDA-CAPEX) for Eclerx Services which is 484% higher than 2.0x BPO/KPO peer group avearge calculated on the basis of 3 companies.

Peers in BPO/KPO

Below you can find Eclerx Services benchmarking vs. other companies in BPO/KPO industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)		14.3%	26.2%	42.4%	14.8%
Hinduja Global Solutions ($HGS)	44.8%	27.6%	26.3%	12.1%
Firstsource Solutions ($FSL)		25.0%	10.2%	-2.3%	6.4%
Xchanging Solutions ($XCHANGING)	-62.2%	16.4%	18.0%	-2.6%
Allsec Technologies ($ALLSEC)		74.8%	-37.6%	-24.4%	54.7%

Median (5 companies)	-8.7%	25.0%	18.0%	-2.3%	14.8%
Eclerx Services ($ECLERX)		39.7%	27.3%	12.0%	39.5%

Top companies by EBITDA margin, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)	17.8%	24.7%	27.4%	26.0%	25.8%
Firstsource Solutions ($FSL)	8.7%	9.9%	11.7%	12.5%	12.5%
Hinduja Global Solutions ($HGS)	11.9%	11.3%	13.0%	11.3%
Xchanging Solutions ($XCHANGING)	13.1%	10.1%	4.1%	10.0%
Tricom India ($TRICOM)				5.8%

Median (6 companies)	11.9%	11.3%	11.7%	10.6%	14.5%
Eclerx Services ($ECLERX)	40.4%	38.7%	42.0%	33.5%	37.0%

Top companies by CAPEX/Revenue, %

Top
	FY2012	FY2013	FY2014	FY2015	FY2016
Hinduja Global Solutions ($HGS)	31.5%	7.2%	6.1%	5.8%
Firstsource Solutions ($FSL)	2.3%	1.4%	1.2%	1.5%	2.7%
Vakrangee ($VAKRANGEE)	27.7%	6.0%	11.7%	0.2%	0.4%

Median (3 companies)	6.6%	5.8%	5.9%	1.5%	1.5%
Eclerx Services ($ECLERX)	5.3%	4.0%	2.5%	6.5%	4.0%

Top companies by ROIC, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Vakrangee ($VAKRANGEE)	20.2%	21.3%	28.3%	36.4%	36.8%
Hinduja Global Solutions ($HGS)	8.1%	8.2%	12.4%	11.0%
Firstsource Solutions ($FSL)	4.0%	7.0%	9.0%	9.5%	10.3%
Xchanging Solutions ($XCHANGING)	8.3%	6.6%	2.2%	7.2%
Allsec Technologies ($ALLSEC)	-13.0%	19.9%	-40.1%	-26.5%	31.8%

Median (7 companies)	8.1%	7.0%	9.0%	9.5%	31.8%
Eclerx Services ($ECLERX)	61.1%	58.7%	62.4%	41.0%	48.4%

Top companies by Net Debt / EBITDA

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Firstsource Solutions ($FSL)	4.2x	4.2x	2.8x	2.5x	2.1x
Hinduja Global Solutions ($HGS)	0.8x	1.7x	1.5x	1.4x
Vakrangee ($VAKRANGEE)	1.9x	1.4x	0.9x	0.6x	0.2x
Tricom India ($TRICOM)	2.1x	4.6x		0.0x
Xchanging Solutions ($XCHANGING)	-0.8x	-2.8x	-6.2x	-3.9x

Median (5 companies)	1.3x	1.4x	1.2x	0.6x	0.2x
Eclerx Services ($ECLERX)	-0.7x	-0.5x	-0.7x	-0.6x	-0.7x

Eclerx Services stock price chart

Eclerx Services financials

mln.	FY2010	FY2011	FY2012

Revenue	11,065	3,421	4,729
EBITDA	1,007	1,913	1,909
Net income	735.4	1,224	1,598
CAPEX	89.510	240.0	251.3
Debt	0.000	0.000	0.000
Cash	320.6	185.7	1,348

About Eclerx Services

eClerx Services Limited provides data analytics and process outsourcing services in the Asia Pacific, the United Kingdom, the United States, and Europe. The company offers reference data management services, such as product reference data, client on-boarding and data management, taxonomy data, and know your customer services; and risk and control services, including document risk review, operational risk reporting, and reconciliation services. It also provides middle office services, such as trade support, trade affirmation and validation, position reconciliation, and reporting and control services; back office services, including confirmations, settlements, asset servicing, tax operations, and performance reporting services; and finance and accounting services comprising product and expense line control, billing and brokerage, and support services. In addition, the company provides ancillary services, such as systems and data migration, technical fund on-boarding, regulatory and compliance support, and research and analysis services; and supports various asset class coverage services, including cash securities, listed and OTC derivatives, foreign exchange, and commodities. Further, it offers commerce and content services comprising content and digital asset management, search services and demand generation, content migration, and customer experience and quality assurance services; data management services, such as customer and product data, supplier and partner data, sales and customer care data, data integration, data stewardship/data quality/data governance, and master data management services; analytics, insights, and reporting services; and quality and monitoring, technical, and work order accuracy services. It serves financial services, broadband, cable and telecom, ecommerce and retail, high tech, industrial manufacturing and distribution, software, media and entertainment, and travel companies. The company was founded in 2000 and is based in Mumbai, India.