Tech Mahindra Ltd. share price target

TECHM's 4QFY21 USD revenue growth of 0.7% QoQ CC was below our already modest expectations. Communications was flat during 4QFY21, while the Enterprise business posted modest growth (1.1% QoQ CC). New deal wins of USD1.04b was the highest in five quarters and split equally between Communications (driven by the Telefonica deal win) and enterprise. EBIT margin increased by 60bp to a multi-year high of 16.5%, unlike our expectation of a 20bp QoQ dip. Increase in margin was led by further rationalizing of headcount (847 employee reduction), while...

Strong Net new deal win (5-qtr high) TCV at USD 1043 mn up 129% QoQ, 103% YoY and will be at similar levels for 1QF22 given robust deal pipeline. TechM reported modest revenue growth of 1.6% QoQ USD, ~70bps below our and street estimates. Growth was soft in both Communications (+1.4% QoQ USD) and Enterprise (+1.8% QoQ USD) segment. Delay in deal closures and lower-than-expected kicker from Comviva led to revenue miss. Net new deal win TCV was strong this quarter at $1.04 Bn +129% QoQ and 103% YoY. But...

We recommend BUY and assign 16x P/E multiple to its FY23E earnings of Rs. 69.7 per share which gives a TP of Rs. 1,120 per share, implying an upside of 16%.

While TECHM's Q4Y21 revenue was slightly lower than our forecast, EBIT margin was a beat. Revenue grew by 0.7% QoQ in CC (+1.6% QoQ in US$ terms). EBIT margin improved by ~55bps QoQ to 16.5%, a 25-quarter high. However, recurring EPS of Rs13, 13.7%/+10.5% QoQ/YoY was a miss, impacted by FX loss and higher ETR. In Q4FY21, TECHM has secured new deals with TCV of US$1,043 mn and is confident of similar run-rate in Q1FY22. For FY22, TECHM has guided for a double-digit revenue growth and EBIT margin of 15%+, higher than our expectation and vs. 14.2% in FY21. While we factor higher EBIT margin for FY22/23, it gets largely offset by higher ETR. We fine-tune our forecast to revenue/EPS CAGR of 9.5%/13.3% over FY21-23. We maintain...

Tech Mahindra (TECHM) posted below-estimated Q4FY21 dollar revenue growth of 1.6% QoQ.

Consolidated revenues for Q3FY21 up sequentially by 2.9% at Rs. 9,647cr (-0.1% YoY) primarily as BPO segment grew 10.9% QoQ to Rs. 1,057cr (+11.5% YoY) partnered with a rise in IT segment by 2.0% QoQ at Rs. 8,591cr (-1.3% YoY). In terms of USD, Retail (+8.4% QoQ), Communications (+4.4%) and Manufacturing (+4.2%) segment's sharp revival elevated the total revenue by 3.4% QoQ to USD 1,309mn (+2.8% QoQ in CC) whereas BFSI (+0.4% QoQ) and Technology segments (-0.5%) remained flat....

While TECHM's Q3FY21 revenue was in line to our forecast, EBIT margin was a big beat. Revenue grew by 2.8% QoQ in CC (+3.4% QoQ in US$ terms). EBIT margin improved by ~173bps QoQ to 15.9% (8-quarter high) and was a big beat to our forecast. EPS of Rs15, +22.9%/+14% QoQ/YoY was also a big beat to our forecast. In Q3FY21, TECHM has secured large deals with net-new TCV of US$455mn. TECHM confirm that the dealpipeline remains robust and it is confident of TCV improving in Q4 and beyond. We factor Q3FY21 beat, largely maintain our revenue forecast and increase FY21/22/23E EBIT margin forecast by 122bps/176bps/134bps to 13.9%/14.2%/14.1% and EPS by 7.9%/10.8%/7.8%. We now forecast revenue/EPS CAGR of 8.9%/11.3% over...

We recommend BUY and assign 14x P/E multiple to its FY23E earnings of Rs. 81.0 per share which gives a TP of Rs. 1,116 per share, an upside of 16%.

5G, digital, large deal wins to drive growth The company reported healthy growth on the communication and enterprise side. Going forward, TechM expects communication to witness improved IT spends led by 5G, digital, customer experience, AI, cloud and network operations. The company is seeing healthy deal wins in 5G (north of US$50 million) and is also seeing traction in small & medium size deals. In addition, from the enterprise side, TechM is seeing improving demand from artificial intelligence, machine learning, cybersecurity, customer...