Tech Mahindra Ltd. share price target

5 February 2018 grew 28% YoY (our estimate of flat growth) to INR12.0b in 3QFY19. Gross margin shrank 100bp QoQ to 33%. However, EBITDA margin expanded 50bp QoQ to 19.3% (above our estimate of 18.9% by 40bp), PAT increased 27.7% YoY to INR12.0b, higher than our estimate of INR9.38b (28% beat), led by lower forex losses (INR0.8b v/s our estimate of INR1.9b) and lower ETR (17.8% v/s our estimate of 25%).

21 November 2018 It had identified three megatrends [1] explosion of connected devices, [2] power of new technologies and [3] exponentiality of content consumption. It took TECHM 2-3 quarters to drill it down across all levels of the organization, and encouragingly, it is now well entrenched in the company. The paradoxical situation of global communication service providers (CSP) is exemplified by the divergence of activity levels vis--vis revenue growth. Tech Mahindra That said, the opportunity for vendors such as TECHM will be driven by multiple trends, not least of them being the shift of USD30b worth of capital expenditure from hardware to software across the Communications and Media industry. Also, there is an active trend of convergence of players across spectrum such as CSPs, OTTs, media/broadcast companies quad-play and vertical integration. These also create opportunities for TECHM to grow within their accounts. However, the implementation cycle may be gradual, constrained by factors that are economic, technological and even political.

Maintain BUY with a TP of Rs 845 based on 15x Sep-20E earnings. Tech Mahindra delivered muted revenue growth in 2QFY19 but margin expansion was ahead of estimates. Revenue stood at USD 1,218mn (-0.5% QoQ, +0.4% CC), vs our est of USD 1,230mn. Enterprise (59% of rev) was down 3.6% QoQ primarily due to Healthcare (HCI Group) impact. Enterprise growth ex-HCI was +3.5% CC QoQ, powered by Digital (31% of rev, +10% QoQ).

TECHM's Q2FY19 revenue growth of 0.4% QoQ in CC (-0.5% in US$) was lower than our forecast of +1.5%. However, EBIT margin of 15.3%, +230bps QoQ beat our forecast of +120bps QoQ. EPS of Rs12, +18.5%/+26.4% QoQ/YoY also beat our forecast. Communications vertical (41.5% of revenue) is back on the growth path with 4.3% QoQ (in US$) uptick. However, this was offset by a 3.6% QoQ decline in the Enterprise business (58.5% of revenue). However, TECHM allayed any concerns and has maintained 8-10% YoY growth in CC for the Enterprise business for FY19. We factor Q2FY19 revenue miss & EBIT margin beat and FX rate of Rs70, vs. Rs68...

ICICI Securities Ltd | Retail Equity Research After five quarters of subdued performance in the communication business, the segment finally reported growth of 4.3% QoQ in Q2FY19. Further, the company also reported improving revenue growth in the retail segment (up 6.0% QoQ) Although revenues in constant currency terms grew a mere 0.4%, if we adjust for ramp down in the HCI business (acquired entity) revenues increased 4.2% QoQ in CC terms. Enterprise segment (ex...

However, OPM fell by sharp 351 bps YoY to 16.25% and after this operating profit went up by 44% YoY to Rs 1345.05 crore. The fall in interest cost (down by 17% YoY to Rs 30.52 crore) was offset by the higher depreciation (up by 14% YoY to Rs 280.77 crore) during the quarter. The consolidated revenue stood at Rs 8,276.38 crore in the quarter under review, up 13% from Rs 7,336.10 crore in the year-ago period....

Revenue grew by 2.75% to Rs. 8276.28 Cr in Q1FY19 when compared to the previous quarter. Tech Mahindra Ltd Q1FY19 results Comment

Maintain BUY with a TP of Rs 740 based on 15x FY20E EPS. Tech Mahindra delivered poor revenue growth in 1QFY19 while margin performance was better than expected. Revenue stood at USD 1,224mn (-1.6% QoQ, +0.3% CC), vs our estimate of USD 1,228mn. Enterprise (+1.8%, +3.8% CC QoQ) continue to drive growth led by traction in Manufacturing (+2.5% QoQ) and BFSI (+2.9%). Digital (27% of rev, +30% YoY) is growing in-line with industry average and is driving enterprise growth.

The decline in Communications segment was higher than our forecast which factored seasonal weakness in Comviva business and issues with couple of clients. TECHM confirmed that it has already secured couple of large deals in the Communications...