Technology

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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