TDCX Inc. – Laying the foundation June 6, 2023 207

PSR Recommendation: BUY Status: Upgraded
Target Price: 12.10
  • 1Q23 results were in line with expectations. 1Q23 revenue/PATMI at 23%/25% of our FY23e forecasts. Adj. PATMI was at 19% of our FY23e forecasts, negatively impacted by S$5.1mn net reversal in SBC.
  • Revenue mix continued to diversify; 76% revenue contribution from top 5 clients (1Q22: 83%). Revenue ex-top 5 clients grew 45% YoY.
  • Travel & Hospitality vertical improved 34% YoY as cross-border travel continued to rebound. Increasing outbound China travel expected to be tailwind.
  • Long-term tailwinds in the expanding BPO market should continue to benefit TDCX, with the company well-positioned to capture much of this due to its strong presence in Asia. Due to recent share price performance, we upgrade to BUY with an unchanged DCF (WACC 10.4%, g 3%) target price of US$12.10.



The Positives

+ Continued diversification in revenue mix. Revenue, excluding its top 5 clients, grew 45% YoY. Top 5 clients’ revenue contribution as a % of total revenue stood at 76% in 1Q23 (1Q22: 83%). Newer geographies incorporated in 2021 (South Korea, Colombia, Romania) are also starting to show meaningful contributions, with revenue growing >4x in 1Q23 vs 1Q22.


+ Travel & hospitality continued to be a bright spot. Revenue from the company’s 2nd largest vertical was up 34% YoY, more than offsetting the slight contraction in YoY revenue from the company’s largest vertical (Digital Advertising & Media). Growth in this vertical was boosted by continued rebound in cross-border travel, with an expectation for this trend to continue as outbound China travel increases.


+ Leveraging AI for growth. ~70% of TDCX’s business is B2B, with many of these clients looking for increasingly complex business solutions. TDCX recently launched TDCX AI, a new specialised consulting division to meet this need – using AI insights and tools to deliver highly personalized and complex customer experience (CX) solutions for clients at a faster pace. Additionally, TDCX is also investing in generative AI tools for improved operational efficiency.


The Negative

– Margin dip due to business expansion. 1Q23 Adj. EBITDA margins were down 7% point YoY to 24.2%. There were several reasons for this: 1) absence of non-recurring government grants from 1Q22; 2) increase in general overheads (hiring and training of new staff) due to expansion into 2 new geographies; 3) increase in group corporate costs excluding SBCs.

Notify of
Inline Feedbacks
View all comments

About the author

Profile photo of Jonathan Woo

Jonathan Woo
Research Analyst

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.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!