EClerx reports better sales growth in Q3 but momentum may slow down in Q4

MUMBAI: Mumbai headquartered knowledge process outsourcing player eClerx reported a better revenue growth than what analysts had expected for the December 2013 quarter. While the company's operating margin eroded on a sequential basis, it was due to the management's decision of higher investment in its own business activities.

Net sales rose by 4.7% sequentially to $35.7 million. The growth was 4% excluding the impact of cross-currency movement during the quarter. The management has stated that some of the work slated for the March quarter was preponed in the December quarter, which contributed to the impressive growth despite seasonal weakness.

It means investors may anticipate a slightly moderate sequential growth in revenue for the March quarter. The company does not offer financial guidance.

Operating margin fell by 300 basis points to 36.7% sequentially in the December quarter. The company spent 180 basis points of this decline on increasing selling and distribution while another 110 basis points drop was due to exchange rate fluctuations.

In the rupee terms, revenue rose by 2% to Rs 2,202 crore and net profit fell by 7% to Rs 623 crore. At the Wednesday's close of Rs 1,148.2, the stock traded at a trailing P/E of 14.6. Centrum Broking has downgraded the stock from "buy" to "hold" highlighting that the valuation no more looks cheaper.