Tech Mahindra Ltd. share price target

For 3QFY2016, Tech Mahindra posted a 0.4% qoq growth in revenues to US$1,015mn V/s an expected US$1,021mn and V/s US$1,011mn in 2QFY2016. On constant currency (CC), the company posted a 1.2% qoq revenue growth. On the operating front, the EBDITA margin came in at 16.9% V/s an expected 17.2% and V/s 16.6% in 2QFY2016, a qoq expansion of 70bp. The EBIT margin came in at 14.3% V/s an expected 14.2% and V/s 13.7% in 2QFY2016. The company posted a net profit of Rs759cr V/s an expected Rs809cr and V/s Rs786cr in 2QFY2016, a qoq de-growth of 3.4%. We remain positive on the stock and recommend a Buy rating with a price target of Rs530. Result highlights: For 3QFY2016, the company posted a 0.4% qoq growth in revenues to US$1,015mn V/s an expected US$1,021mn and V/s US$1,011mn in 2QFY2016.. In INR terms, the company posted sales of Rs6,701cr V/s an expected Rs6,729cr, a qoq growth of 1.3%. On CC, the company posted a 1.2% qoq revenue growth. The growth was mainly driven by ROW, which constituted around 23.2% of sales in 3QFY2016 V/s 21.9% of sales in 2QFY2016. USA and Europe constituted 47.8% (48.9% of sales in 2QFY2016) and 28.9% (29.3%...

Tech Mahindras revenue grew just 0.4% QoQ at US$ 1,015mn (vs. our est. US$ 1,023mn). The key telecom vertical continues to see growth headwinds (-2.7% QoQ). However, the enterprise segment saw decent growth of 3.8% QoQ led by retail ( 13.7% QoQ) and MFG ( 2.8%). CC revenue rose 1.2% QoQ and EBITDA margin was largely in-line, up 31bps QoQ (16.9%).

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...