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Tech Mahindra Ltd Research Report - 03rd Jun 2016

IT | Published on Jun 03rd 2016

IT

Tech Mahindra posted sales of Rs6,884cr for 4QFY2016 (V/s Rs6,701cr in 3QFY2016), which is a qoq growth of 2.7%. In US$ terms, sales came in at US$1,023mn (V/s our expectation of US$1,021mn), a qoq growth of 0.8%. In terms of geographies, growth was driven by ROW (accounted for 24.7% of sales V/s 23.2% of sales in 3QFY2016). In terms of industry, growth was driven by BFSI (which accounted for 10.6% of sales V/s 9.8% of sales in 3QFY2016). On the operating front, the EBDITA margin came in flat on a qoq basis at 16.9%, while the EBIT margin stood at 13.7% V/s 14.4% in 3QFY2016. The net profit came in at Rs897cr V/s Rs759cr in 3QFY2016, a qoq growth of 18.2%, mainly driven by a rise in other income. Other income for the quarter stood at Rs166cr V/s Rs64cr in 3QFY2016. We maintain our Buy on the stock. Result highlights: Tech Mahindra posted sales of Rs6,884cr for 4QFY2016 (V/s Rs6,701cr in 3QFY2016), which is a qoq growth of 2.7%. In US$ terms, sales came in at US$1,023mn (V/s our expectation of US$1,021mn), a qoq growth of 0.8%. In terms of geographies, growth was driven by ROW (accounted for 24.7% of sales V/s 23.2% of sales in 3QFY2016). Europe accounted for 28.5% of sales V/s 28.9% in 3QFY2016, while USA contributed 46.8% of sales V/s 47.8% in 3QFY2016. In terms of industry, growth was driven by BFSI (which accounted for 10.6% of sales V/s 9.8% of sales in 3QFY2016). On the operating front, the EBDITA margin came in flat on a qoq basis at 16.9%, while the EBIT margin stood at 13.7% V/s 14.4% in 3QFY2016. The net profit came in at Rs897cr V/s Rs759cr in 3QFY2016, a qoq growth of 18.2%, mainly driven by a rise in other income. Other income for the quarter stood at Rs166cr V/s Rs64cr in 3QFY2016. Outlook and valuation: The Management remains confident of reverting back to the original profitability by FY2016-18E. We expect a CAGR of 10.6% and 12.8% in USD and INR revenue respectively over FY2016-18E, driven by acquisitions. The PAT is expected to grow at a CAGR of 13.2% over FY2016-18E. We maintain our Buy on the stock.

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CMP 546
Target Price 700
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)45,131.18
MCAP NSE (Rs in Cr)45,121.45
P/E (x)14.65
EPS (Rs.)31.65
BV (Rs.)158.36
Div Yield (%)2.57
FV (Rs.)5.00
P/BV (x)3.02
EV/Sales (x)1.66
EV/EBITDA (x)10.19

Shareholding Pattern (%)

Foreign40.0
Promoter36.0
Public & Others12.0
Institution11.0
Corporate1.0
Grand Total100.0

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