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07 October, 2015 00:19 IST
Analysts stay bullish on TechM post encouraging Q3 performance
Source: IRIS | 07 Feb, 2013, 12.43PM
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Tech Mahindra (TechM), India's sixth largest software exporter, said Wednesday the company's third quarter profit surged 36% sequentially and 67% on year on year basis to Rs 2.42 billion. Profit including share of associate was at Rs 2.76 billion.

Reveues on the other hand was at Rs 17.91 billion for quarter ended Dec. 31, 2012, registering rise of 10% sequentially and 24% on year on year basis.  While operating profit went up 11% sequentially and 61% on year on year basis to Rs 3.76 billion.

Commenting on the numbers, Sandip Agarwal and Omkar Hadkar, Edelweiss Research, said,''TechM reported another quarter of robust performance as Q3FY13 revenue of USD329 million (up 10% QoQ) was ahead of our and Street's estimates. On an organic basis growth was flat against our expectation of 2% QoQ decline. EBITDA margin of 21%, up 30 bps QoQ, surpassed our 19.5% estimate. Even as consolidation of Hutch and Comviva drove growth during the quarter, BT continued to skid (3.4% QoQ) and non-BT (excl. Hutchison and Comviva) reported decent growth of 2%. We maintain our 14% FY14 revenue growth estimate (for merged entity) based on improved visibility on organic non-BT, enhanced deal pipeline and discretionary spend uptick in Mahindra Satyam (MSAT). Maintain 'BUY' with revised TP of Rs 1,140, implying 12x our FY14E EPS (for merged entity) of Rs 95.1.''

''TechM reported a better than expected quarter as margins expanded by 40 bps. Organic revenues were flat QoQ as decline in BT (4.5% QoQ) was offset by growth in the rest of the portfolio. Overall while BT remains sluggish, we note that the remaining portfolio continues to see healthy growth, which along with cost focus would help drive consensus earnings upgrades. Earnings beats and merger clarity are the key stock triggers and remains our high conviction Buy idea,'' said Rumit Dugar and Udit Garg, Religare Retail Research.

Shashi Bhusan and Pratik Shah, Prabhudas Lilladher said, ''TechM's Q3FY13 results were ahead of our expectation. The company reported revenue of Rs17.91 billion (PLe: Rs 17.71 billion, Cons: Rs 17.59 billion), a growth of 9.8% QoQ (10% QoQ in USD terms). We expect demand environment to be stable with recovery in deal pipeline from  telecom service provider and aggressive inorganic strategy to improve the revenue momentum. Moreover, Satyam would provide respite at the  bottom-line. We retain our Accumulate rating, with a TP of Rs 1,100, 10x FY14e earnings estimate.''

''TechM reported strong set of results for 3QFY2013, with operating performance ahead of our expectations. The dollar revenues came in at USD 329.4 million, up 10.1% qoq, aided by acquisition of HGS and Comviva. HGS contributed ~USD 37 million to the revenues while Comviva contributed USD 6 million (19 days contribution) during the quarter. USD revenues from non-BT accounts grew by approx. 16.7% qoq to USD 234 million, aided by acquisitions. The overall results were healthy on the back of acquitsions and new deals. We continue to remain positive on the stock; the target price is currently under review,'' said Angel Broking.

Ashwin Mehta and Pinku Pappan, Nomura Equity Research, said,''Tech Mahindra 3QFY13 results were ahead of expectation on margins and PAT. Revenues were in line with our expectations with flat q-q growth on an organic basis in TechM, mirroring the trend at Mahindra Satyam. PAT was ahead of expectation driven by the margin beat and higher other income. Post the results at TechM and Satyam, we believe the combined entity is less likely to surprise on revenues as BT declines continue, headcount curtailments do not provide comfort and deal flow in the non BT segment is largely built in. Overall, we do not see a material change to our earnings estimates. Maintain Neutral.''

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

Tech Mahindra Limited   (Q,N,C,F)*

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