Dolat Capital Market's research report on Tech Mahindra
TECHM reported CC growth of 0.7% QoQ (DE: 2.0%) due to weak performance of most verticals except BFSI (4.9% QoQ growth). EBIT margin further improved by 55bps to 16.5% (DE: 15.5%) led by higher off-shoring and improved operational efficiency. Net New TCV signings showed a strong improvement at $1Bn (Expects similar traction in Q1) while TTM TCV were down 40% at $2.2Bn. It has guided for double digit growth in FY22 which is led by improved deal win momentum and recovery in Retail/Mfg./Telecom Verticals. Guided for EBIT Margin of 15%+ for FY22E as it expects to overcome headwinds of upcoming hike (from April’21), hiring, deal ramp-up costs, through operational efficiencies and operating leverage.
Outlook
Factoring modest results, confident outlook and strong TCV performance, we increase our earnings estimates by 4%/3% in FY22E/FY23E and maintain Accumulate rating with TP of Rs1060 valued at 18x FY23E EPS.
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