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Equirus
Tech Mahindra
CMP: ₹379.30
Target: ₹453
An offshoot in the Mahindra group, Tech Mahindra is a $4.4 billion company with over 1.17 lakh professionals across 90 countries, helping over 840 global customers including Fortune 500 companies.
Tech Mahindra reported disappointing 4Q earnings driven by significant margin compression. One per cent q-o-q (12 per cent y-o-y in CC) dollar revenue growth led by manufacturing (5.8 per cent q-o-q), BFSI (9.1 per cent q-o-q) and helped by others (9.6 per cent, but on smaller base). Though, dollar revenues grew 10.6 per cent y-o-y driven by momentum in enterprise (21 per cent y-o-y) telecom remains volatile (portfolio rationalization efforts at LCC continue to drag telecom recovery), while margin performance remains unpredictable.
EBITDAM declined 371 bps q-o-q, significantly higher than 36 bps decline EE. Weak 4Q and uncertainty over 1HFY18 leads to cut in earnings, multiple, target price, and rating to Add versus Long earlier.
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