TDCX Inc - Stock Analyst Research
Target Price* | - |
Recommendation | ACCUMULATE |
Market Cap* | - |
Publication Date | 13 Mar 2023 |
*At the time of publication
TDCX Inc. Near-term pain expected
- 4Q22 results were in line with expectations. FY22 revenue/PATMI was at 100%/97% of our FY22e forecasts. Earnings were hurt by S$6mn FX loss on cash and receivables.
- 14% YoY revenue growth driven by double-digit growth in the digital advertising vertical, overall net revenue retention rate of 117%.
- EBITDA margin declined 8% due to over-hiring and continued investments to support business growth. Soft FY23e revenue guidance of 3-8% YoY growth.
- We cut FY23e revenue/EBITDA estimates by 8%/16% to reflect ongoing macro challenges with clients reducing headcount, and a contraction in margins due to continued expenses to support business expansion. TDCX’s ability to generate healthy cash flows is intact – net cash from operations grew 59% in FY22. Long-term tailwinds in the expanding BPO market should also benefit TDCX. We maintain an ACCUMULATE recommendation with a reduced DCF (WACC 10.4%, g 3%) target price of US$12.10 (prev. US$14.80).
The Positives
+ Revenue growth driven by digital advertising vertical. TDCX’s 4Q22 revenue grew 14% YoY, driven by a double-digit growth from clients in the digital advertising and media vertical – 54% of total revenue. The company’s second largest vertical – travel & hospitality, also saw strong 26% YoY growth with travel rebounding globally. TDCX’s net revenue retention rate was at 117%, demonstrating a healthy incremental revenue pipeline from existing clients.
+ Expansion over last 2 years starting to bear fruit, reduction in revenue concentration risk. TDCX’s expansion into 7 new geographies over the last 2 years is starting to pay off, with clients added from this expansion contributing ~10% of revenue growth in FY22e. For 4Q22, TDCX added 10 new clients, and also launched 12 new client campaigns, increasing its total client campaign count by 62% YoY. In addition, these new clients aided in reducing the overall revenue concentration risk of the company, with its top-2 clients as a percentage of total revenue down 700bps to 52%.
The Negatives
– Soft FY23e guidance due to limited visibility. Macro uncertainty continues to impact client headcount requirements in the near term, with the digital advertising vertical affected the most severely. As a result, expected volume flattening from clients in this vertical (58% of total revenue) dragged down FY23e revenue guidance.
– Margins declined due to combination of over-hiring and continued investments to support business growth. 4Q22 adj. EBITDA margins contracted 830bps from 4Q21 to 26.5% as a result of over-hiring in anticipation of volume growth that did not materialise, and increased costs to support continued business growth.
About the author

Jonathan Woo
Research Analyst
PSR
Jonathan covers the US technology sector focusing on internet companies. Formerly a national and professional athlete, he graduated from the University of Oregon with a Bachelor’s Degree in Social Sciences.
About the author

Jonathan Woo
Research Analyst
PSR
Jonathan covers the US technology sector focusing on internet companies. Formerly a national and professional athlete, he graduated from the University of Oregon with a Bachelor’s Degree in Social Sciences.