Tech Mahindra posted results marginally better than expected on the top line, while the net profit came in below expectations. On the top-line, the company posted USD revenues of USD 900 million V/s USD 890 million expected , posting a qoq growth of 5.2%.

In the INR terms, the company posted net sales of Rs 54.88 billion V/s Rs 54.09 billion expected, a qoq growth of 7.2%. On the operating front, the EBIT margins came in at 17.4% V/s 17.2% expected, an expansion of 220bps, on lower employee costs during the period. Thus, the net profit came in at Rs 7.20 billion V/s Rs 7.48 billion expected, an 14.1% qoq growth. The net profit during the period was impacted by the forex loss of Rs 458 million during the period.

Commenting on the result, Sarabjit Kour Nangra, VP research, IT, Angel Broking, said, ''In terms, of geography, the growth was mainly driven by the USA, which posted a qoq growth of 9.7% and mostly driven by the Top clients. However, during the quarter the company added business from new clients also, as the repeat business dipped to 97% from 99% in 1QFY2015. In terms, of vertical, the Telecom sector grew by 7.3% qoq, Manufacturing 5.2% qoq and BFSI grew by 5.2% qoq, while Technology, media & entertainment declined by 6.5% qoq.

On the operating front, the utilization improved to 73% V/s 72% in 1QFY2015, this along with lower employee costs aided the margin expansion. In terms of client additions, the company added net 17 clients during the period, taking the active client lists to 649 V/s 632 in 1QFY2015. Majority of the client wins have been in the USD 1-5 million order size and one client was added in the >USD 20 million and >USD 50 million category respectively. On, the negative side, IT attrition rate (last tweleve months) that jumped 200 basis points to 18% from 16% in 1QFY2015.

Going forward, we believe that the company will be able to post a robust growth on back of the new client additions and better productivity. Hence given the valuations, which at 14.5xFY2016E, at discount to its peers. Thus, we maintain our buy recommendation rating on the stock with a price target of Rs 2,788.''

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