Motilal Oswal - Tech Mahindra Limited (TECHM) MOSL: TECH MAHINDRA (Buy)-Telecom strength offset by Enterprise softness-Execution on margins drives better-than-expected operating profit

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Motilal Oswal

MOSL: TECH MAHINDRA (Buy)-Telecom strength offset by Enterprise softness-Execution on margins drives better-than-expected operating profit

Tech Mahindra: Telecom strength offset by Enterprise softness; Execution on margins drives better-than-expected operating profit

(techm IN, Mkt Cap USD9.1b, CMP INR684, TP INR800, 17% Upside, Buy)

Revenue miss offset by margins beat: TECHM’s CC revenue came in flattish QoQ (+0.4% v/s our estimate of +1.5%) in 2QFY19. The miss can be ascribed to a sharper-than-expected decline in Healthcare. EBITDA margin expanded 240bp QoQ, mainly led by operational efficiencies and currency tailwinds. PAT growth of 19% QoQ was marginally below our estimate because of lower other income.
Encouraging pick-up in Telecom: Telecom revenue grew 5% QoQ CC, and is followed by two strong quarters of deal wins. Continual of the broad-based uptick in momentum is further substantiated by additional USD300m of wins in this quarter (of a total of USD550m) and a seasonally strong upcoming 2H.
HCI softness impacts performance: Enterprise had been growing in the high-teens for the last eight quarters. However, the USD40m decline in HCI resulted in growth rates dropping to -3.4% QoQ and +7.9% YoY. With new orders expected to partly fill the void in HCI and continued growth in the verticals of Manufacturing and Technology, Media & Entertainment, Enterprise is on track to achieve the targeted 8-10% YoY growth in FY19.

31/10/2018 16 EN

Underlying

Tech Mahindra Limited

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.

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INE669C01036 National Stock Exchange of India India

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Motilal Oswal

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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MOSL: TECH MAHINDRA (Buy)-Telecom strength offset by Enterprise softness-Execution on margins drives better-than-expected operating profit

TECH MAHINDRA sees an upgrade to Slightly Positive due to a better fundamental star rating

Monthly LMI Update Independent Investment Research

MOSL: TECH MAHINDRA (Neutral): Improving outlook, but operational metrics stretched

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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