Tech Mahindra Ltd. share price target

Tech Mahindra reported USD revenue of $1,015mn, a growth of 0.4% QoQ. The revenue performance was largely in-line with our estimates. In constant currency terms, it reported growth of 1.2% QoQ. Growth during the quarter was led by Enterprise segment which grew 3.8% QoQ while Communication segment registered de-growth of 2.7% sequentially mainly due to the ramp-down in some of the top customers and adverse cross-currency impact.

Integration benefits of LCC have been delayed due to the weakness in NSM market, withthedecliningspendsandconsolidationactivity. Overall,themanagementseesgrowthandmarginsreturningtotheearlierlevelsovera...

Tech Mahindra (TECHM) posted numbers below our estimates on lower revenue as well as lower growth in margin. While lumpy growth in enterprise division supported 1.2% cc revenue growth of TECHM, decline in communications division had a negative impact due to project ramp-down, furlough seasonality as well as extended spending decisioncycle by large communications accounts. With volatility in communication division (large accounts as well as mid-sized accounts) and TM&E; vertical ahead, margin headwinds of wage hike in 1Q, we expect benign earnings growth ahead (7% CAGR over FY15-18E) and downgrade our recommendation to HOLD (BUY earlier) with Target Price of Rs520. Communication division results in soft quarter; outlook muted ...

We met Tech Mahindra for a business update. We believe there is little change in outlook for the telecom vertical. However, with M&A; deals such as AT&T-DirecTV; receiving approval from competition authorities, integration work could be a dark horse in FY17E; Infosys saw benefits from this in FY11 in BFSI. 2HFY16 will be better on Comviva seasonality.

Tech Mahindra in Joint Venture with M&M (60:40) announced acquisition of Pininfarina, an automotive design and engineering services company. As part of the agreement, Tech Mahindra and M&M will purchase 76.06% of Pininfarina shares from the current shareholder Pincar for a consideration of 25.3mn (at 1.1/share).

The service offering overlap is limited to 5% which offers cross-sell opportunities of TECHM's engineering and manufacturing services into Pininfarina's client base. TECHM's engineering services (~6% of revenue at US$225mn annual rate) is expected to be complemented by Pininfarina's offerings and the addressable market of outsourced automotive engg. services is estimated at US$10bn (US$2bn increase in addressability with Pininfarina deal). We believe that augmenting of design skills will support the digital expansion of TECHM. The sector is rapidly scaling-up its digital capabilities by acquiring and expanding design skills; Accenture's expansion of Fjord...

Tech Mahindra posted better than expected results for 2QFY2016. The company posted a 2.2% qoq growth in revenue to US$1,011mn V/s an expected US$1,004mn and V/s US$989mn in 1QFY2016. On the EBIDTA front, the EBITDA margin came in at 16.6% V/s 15.9% expected and V/s 14.9% in 1QFY2016. The company posted an EBIT margin of 13.7% V/s 13.1% expected and V/s 12.1% in 1QFY2016. Thus, the Net Profit came in at Rs786cr V/s Rs725cr expected and V/s Rs676cr in 1QFY2016, a qoq growth of 16.2%. We currently have a Buy rating on the stock with a price target of Rs646. Result highlights: Tech Mahindra posted a 2.2% qoq growth in revenue to US$1,011mn V/s an expected US$1,004mn and V/s US$989mn in 1QFY2016. In rupee terms, the company posted a 5.1% qoq revenue growth to Rs6,616cr V/s Rs6,577cr expected and V/s Rs6,294cr in 1QFY2016. The growth was primarily driven by USA, which contributed ~48.9% of sales in 2QFY2016 V/s ~47.7% in 1QFY2016. The EBIDTA margin came in at 16.6% V/s 15.9% expected and V/s 14.9% in 1QFY2016. The margin expansion was driven by improved capacity utilization, which moved up from 74% in 1QFY2016 to 77% in 2QFY2016. Excluding trainees, utilization inched...

Tech Mahindra reported USD revenue of $1,011mn, growth of 2.2% QoQ. The revenue performance was slightly lower than our estimates. In constant currency terms, it reported growth of 3.0% QoQ. Growth during the quarter was led by Communication segment which grew 2.6% QoQ while Enterprise segment grew 1.8% sequentially.

and higher on bottomline (due to higher other income). The performance does not show any signs of turnaround in margins or the organic growth profile of the company. Communication business (50% of revenue) continues to remain under pressure, and with...

Tech Mahindra (TECHM) posted results largely in-line with our expectation of moderate revenue acceleration coupled with productivity-led margin improvement. While the growth trajectory is unchanged due to persistent challenges in communications vertical and sporadic growth pattern in enterprise, we expect 2H to accelerate on LCC, Comviva seasonality as well as on account of margin drivers...