Accumulate Tech Mahindra; target of Rs 810: PLilladher

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Accumulate Tech Mahindra; target of Rs 810: PLilladher

Prabhudas Lilladher is bullish on Tech Mahindra and has recommended accumulate rating on the stock with a target of Rs 810 in its August 12, 2011 research report.

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Prabhudas Lilladher is bullish on Tech Mahindra and has recommended accumulate rating on the stock with a target of Rs 810 in its August 12, 2011 research report.

"TECHM reported Q1FY12 results touch ahead of our expectation. The company reported revenue of Rs12.93bn (PLe: Rs12.87bn, Cons: Rs12.91bn), a growth of 2.5% QoQ (4.1% QoQ in US$ terms). Operating margins eroded by 183bps to 18.7% (PLe: 19.3%, Cons: 20%), driven by lower utilization and higher contribution from BPO. PAT (incl. Satyam) jumped by 200% QoQ to Rs2.8bn (PLe: Rs2.2bn, Cons: Rs1.9bn), due to Satyam contribution of Rs96cr (Q4FY11: Rs114.4cr)."

"1) Volume growth of 2% QoQ 2) Revenue growth, excluding BT, was 5.5% QoQ (BT grew by 1.5% QoQ due to cross currency) 3) No signs of pick-up in discretionary spend 4) Bharti BPO project ramp-up on track 5) Wage hike in Q2FY12 Offshore 12% Onsite 2.5% 6) Hedges: £250m (@$1.7) $355m (@Rs49.5) 7) Vodafone Australia is expected to ramp-up in Q2FY12 8) More rebadged employees in Africa to come on-board 9) Cash Rs1.9bn, Debt Rs12.8bn 10) BT has put significant amount of business for tender hence uncertainty on current run-rate 11) 1.5k fresher joined in Q1FY12 (FY12: 3.5k) 12) Forex gain $8m for Q1FY12 (vs Q4FY11: $4.1m)"

"We believe demand environment in telecom would see recovery in H2FY12. Moreover, we expect Satyam to provide much needed impetus at the bottom line. We revise our Satyam estimates upward by 20% for FY12 and FY13. However, due to uncertainty in BT put £72m/yr run-rate at risk. We retain our 'Accumulate' rating, with a target price of Rs 810, 10x FY13e earnings estimate," says Prabhudas Lilladher research report.

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To read the full report click on the attachment