Birlasoft shares rose 13%, their biggest single-day gain in five years, on October 29 after brokerages found the IT company's revenue growth above estimates.
Its constant currency revenue grew 2.1% sequentially but was down 1.1% from the previous year. It reported CC revenue growth of 2.1%, which is its best in the last eight quarters.
The company EBITDA margin was at 15.2% from 90 basis points from the previous quarter. Its wage increments impacted margins by approximately 170 basis points sequentially.
"The 2QFY27 EBITDA margin at 15.2% (down 95bp/84bp QoQ/YoY) was impacted by wage hikes and continued investments in sales and capabilities, partly offset by operational efficiency, productivity improvement and better revenue quality. While rising AI engagements are margin-accretive, continued investments in sales to support topline growth are likely to keep margins around 15% in 2HFY27F. Consequently, we see limited scope for margin expansion in FY28F and FY29F," said InCred Equities.
"We now model 1.6% (2.3% earlier) US$ revenue CAGR over FY26-29F and 10.7% (12.1%) PAT (Rs) over the same period. We maintain HOLD rating on Birlasoft and value it at 13x FY28F EPS, with a discount warranted by the relatively high share of cash and investments at 48%, to arrive at a lower target price of Rs 306 (Rs 439 earlier). Upside risks: Strong execution and M&A-led growth providing earnings cushion. Downside risks: Macroeconomic uncertainty and client-specific challenges," the domestic brokerage said.