Emkay Global Financial Services has upgraded Tech Mahindra to 'Hold' from 'Reduce' after the company declared its first quarter results. The stock broker fixed price target at Rs 520.

Commenting on the results, Emkay Global Financial Services said, "Inline operating performance with a 0.5% QoQ USD revenue growth and ~30 bps decline in EBITDA margins. Performance is better than what was feared by a larger section of the street. Revenue performance in Communications vertical (-4.2% QoQ) remains weak as Enterprise Segment grows strongly lending confidence to a 'double digit' and ‘inline with industry growth’ for the Enterprise business.''

Commenting on the investment rationale, Emkay Global Financial Services said, ''Management remains focused on improving margins ahead through increase in utilization (some improvement reflected in June'15 quarter as well). Moderation in sub-contracting expenses (up 300 bps YoY in June'15 quarter) to aid margin improvement in the medium term. We back 'normalization of margins' ahead aided by focus on operational parameters.  Post a 25% correction in the past 6 months, valuations are inexpensive (at ~14x FY17E P/E) and drive ratings upgrade to HOLD (V/s REDUCE earlier) with a revised TP of Rs 520 (V/s Rs485 earlier).''

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