MOSL: TECH MAHINDRA (Buy)-Continues revise margin and drive growth via Enterprise
Tech Mahindra: Continues revise margin and drive growth via Enterprise
(TECHM IN, Mkt Cap USD10.1b, CMP INR702, TP INR810, 15% Upside, Buy)
- Continued execution on margin revival: TECHM's 4QFY18 CC revenue growth of 1.7% QoQ was in line (est. of 1.5%). While Telecom was flat, and perhaps down in CC, growth was led by Enterprise (+4.9% QoQ). Growth also mirrored FY18 trends, where Telecom revenue was flattish, while Enterprise segment grew 19% YoY, driving overall USD revenue growth of 9.7%. The year, however, was all about execution of margin, which improved from lows of 12% in 4QFY17 to exit the year at 17.5% (est. of 17.3%). PAT of INR12.2b was up 30% QoQ (est. of INR9.6b, +2% QoQ); the beat was led by higher other income (sale of land) and a lower ETR.
- Accelerating thrust on new technologies: TECHM has been investing significantly in building new solutions with an ecosystem partnership approach, and at the same time letting go some of the low-yield legacy businesses. Telecom was affected to the extent of USD100m as a result of the same. The endeavor has led to a change in RTB (run-the-business)-CTB (change-the-business) mix from 60-40 last year to 43-57 this year. Digital grew 35% YoY in FY18 and now contributes 27% of overall revenues.
Tech Mahindra Limited is engaged in the business of computer programming, consultancy and related services. The Company's segments include Information Technology (IT) Services and Business Processing Outsourcing (BPO). The Company operates in various sectors, including telecom business and enterprise solutions business. The telecom business provides consulting-led integrated portfolio services to customers, which are telecom equipment manufacturers, telecom service providers and IT infrastructure services, and BPO, as well as enterprise services (banking, financial services and insurance (BFSI), retail and logistics, and manufacturing, among others) of IT and IT-enabled services delivered through a network of various locations around the world. The enterprise solutions business provides IT services, including IT enabled services, application development and maintenance, consulting and enterprise business solutions, extended engineering solutions and infrastructure management services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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