MOSL: Morning India (22/May/19): 1. Tech Mahindra (Communication and Enterprise swap momentums); 2. Bosch; 3. United Breweries; 4. Torrent Pharma; 5. JSPL; 6. CG Consumer Elec.; 7. JK Cements; 8. Indostar Capit
MOrning India (22/May/19): 1. Tech Mahindra (Communication and Enterprise swap momentums); 2. Bosch; 3. United Breweries; 4. Torrent Pharma; 5. JSPL; 6. CG Consumer Elec.; 7. JK Cements; 8. Indostar Capital
Today’s top research idea
Tech Mahindra: Communication and Enterprise swap momentums
- For FY19, TECHM's USD revenue grew 4.2% YoY, EBITDA increased 34% YoY and PAT was up 13% YoY. Including the buyback of INR19.6b, the total payout for the year stood at 74.5%. For 4QFY19, USD revenue grew 1.9% YoY (our estimate: +3.5% YoY), and was dragged by Enterprise (57.3% of revenues) decline of 2.2% QoQ, v/s our estimate of 1.5% Growth.
- Adjusted EBITDA margin declined 60bp QoQ to 18.7%, v/s estimate of 19.1%. Going forward, while TECHM continues to expect high-single digit revenue growth with stable margin, the mix of revenue traction is expected to change, with Communications likely taking over from Enterprise. Communications turnaround is a positive for TECHM, but case for upside weakens if Enterprise doesn't compound. Our price target of INR890 discounts forward earnings by 14.5% (5-year average) and implies 15% upside. Maintain Buy.
Piping hot news
RBI rules out credit line for NBFCs, discusses revised bad loan circular
- The Reserve Bank of India (RBI) board on Tuesday suggested not extending a credit line to struggling non-banking financial companies (NBFCs) because it felt there was no systemic liquidity issue but there were solvency concerns in some large entities. The board, headed by RBI Governor Shaktikanta Das, met in Chennai and discussed the NBFC crisis as well as a revised circular that would replace the controversial “resolution of stressed assets” framework released by the central bank on February 12, 2018.
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