Feb 09, 2013, 01.48 PM | Source: Moneycontrol.com
Dolat Capital is bullish on Tech Mahindra and has recommended buy rating on the stock with a target price of Rs 1360 in its February 09, 2013 research report.
, Dolat Capital |
"Tech Mahindra, reported 10% QoQ growth despite challenging business outlook in the Telecom vertical driven by new deal momentum and inorganic efforts. We remain positive on the stock in view of its renewed proactive efforts to drive the revenue momentum, integration gains from Satyam and attractive valuations (8x FY14E earnings).
Tech M believes that the demand from the Telecom vertical is likely to remain soft for several quarters to come owing to stagnant sector revenues and constant Capex requirement led by 4G, LTE and other evolving technologies. It believes the traction can be build upon giving transformational solutions to the Telco’s that is helping it maintain the momentum. It has bagged 5 deals (1 large) with total TCV of over USD 100mn+ in the quarter.
BT revenues have slipped by about 3% in the quarter owing to furloughs and some internal re-jig in structure. It is likely to see some more cuts in discretionary spends and would impact revenues for TechM in Q4FY13 and Q1FY14. We have built in -3% and 3% revenues growth for FY14/15E. Non BT revenues were up 17% QQ of which 2% was organic and rest on consolidations of Comviva (USD 6mn - 19 days sales included in the quarter) and HGS (USD 37mn - full quarter versus just a month in Q2).
The revenues are likely to be driven by integration of acquired entities (HGS and Comviva) as well as strong new deal closures (closed 5 deals across geographies). We believe strong structural growth along with OPM efficiency would drive the overall metrics of the company and thus the revision in rating. We maintain our Buy recommendation on the stock with a target price of Rs 1360, valued at 10x of FY15E earnings," says Dolat Capital research report.
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