Nov 09, 2013, 03.03 PM IST
Dolat Capital is bullish on Tech Mahindra and has recommended 'Accumulate' rating on the stock with a target price of Rs 1740 in its November 07, 2013 research report.
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Accumulate Tech Mahindra; target Rs 1740: Dolat Capital
Dolat Capital is bullish on Tech Mahindra and has recommended 'Accumulate' rating on the stock with a target price of Rs 1740 in its November 07, 2013 research report.
Like this story, share it with millions of investors on M3
Accumulate Tech Mahindra; target Rs 1740: Dolat Capital
Dolat Capital is bullish on Tech Mahindra and has recommended 'Accumulate' rating on the stock with a target price of Rs 1740 in its November 07, 2013 research report.
"Tech Mahindra reported 4.7 percent QQ growth despite challenging business outlook in the Telecom vertical driven by strong traction in the non telecom business up 7 percent QQ with 53 percent revenue share (Telecom biz grew by 2.5 percent QQ during the quarter). Tech M has been able to scale up well across verticals through its focused approach on large deals - consistent increase in USD50mn clients to 10 from 7 a year ago - added 13 deals with USD0.5bn TCV in Q2. We remain positive on the stock in view of its sustained traction (4.2 percent CQGR over last 6 quarter) and improved profitability (150bps during the same period). We expect a Revenue/EPS CAGR of 23/33 percent over FY13-15E with an Accumulate rating on the stock with a target price of Rs 1740, valued at 12x of FY15E earnings."
"Strong deal Traction: The Company added 13 new deals during the quarter across geography and service line with a total TCV of over USD500mn. The average tenure is about 3 years and with most of them likely to get commence Q3-Q4 onwards. The deals traction has been most in Retail/BFSI/Telecom and across both key business segment. The company has appointed dedicated sales leaders across key countries in the continental Europe to tap the likely traction going forward from the region."
"BT slippage impact moderate: The two deals that has not been renewed are likely to impact revenues of about Rs 350mn over Q4FY14/Q1FY15. We believe the total impact is about 1.5 percent on revenues and thus have no material bearing on our estimates. OPM to remain in range: OPM improved by 250bps in the quarter largely on account of 11 percent Rs depreciation providing over 300bps in Fx gains. The company has announced wage hikes of about 2.5 percent/7 percent for onsite/offshore employees. The hike is applicable only for around 80 percent of employee base (excludes employees from recently acquired entities and new joiners) and would impact profitability by about 200bps. We expect another hike due in H1FY15 for rest of the employees and thus OPM band of 19-20 percent over H2FY14-FY15."
Valuations: "The commentary has turned confident furthermore as it witness demand traction in US, Nordics and other markets. The traction is evident from strong deal additions - 13 deals with USD500mn TCV added during the quarter. However, we expect performance to remain at par with peers in view of normalisations of acquisitions in the revenue run rate and sustained volatility in BT. We expect a Revenue/EPS CAGR of 23/33 percent over FY13-15E with an Accumulate rating on the stock with a target price of Rs 1740, valued at 12x of FY15E earnings (inline with current levels)," says Dolat Capital research report.
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