Buy Tech Mahindra; target of Rs 820: Dolat Capital

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Buy Tech Mahindra; target of Rs 820: Dolat Capital

Dolat Capital is bullish on Tech Mahindra and has recommended buy rating on the stock with a target of Rs 820 in its February 8, 2012 research report.

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Dolat Capital is bullish on Tech Mahindra and has recommended buy rating on the stock with a target of Rs 820 in its February 8, 2012 research report.

"Tech Mahindra's Q3 FY12 revenue stood at USD 289mn, down 2.5% QoQ (flat in constant currency terms) well in line with our estimates. In reported currency terms company delivered a growth of 8.4% QoQ at Rs 14.4 bn inline with our estimation of Rs 14.5 bn. Non-BT revenue remained flat during the quarter (QoQ growth of 0.6%), whereas BT revenue slipped further by 7.8% QoQ (BT revenues at about GBP 64mn). It continues to maintain its flattish business outlook for FY12- FY13 from its top account as the business negotiations are still in progress."

"Operating profits grew by 14.7% QoQ at Rs 2.3 bn largely on account of better fx realizations and normalization on SG&A expenses (15% of revenues). PAT (excluding Satyam) grew by 4% QoQ to Rs 1.44 bn - below our estimations Dolat est. of Rs 1.5 bn). Profits, including that of Satyam, grew by 15% as Satyam continuous to improve on operating profitability. We believe that the sustained slow down in the top account and the recent cancellations of 2G licenses (Tech M is involved in roll out of new players and expects no delinquencies in collection of receipts) would restricts the growth in coming quarters. Thus we believe the delta in Satyam financial and incremental clarity on the merger with Satyam remains the only trigger going forward. We remain positive on the stock in view of attractive valuations and improving business prospects (non BT front) and thus maintain our Buy rating, with a target price of Rs 820," says Dolat Capital research report.

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To read the full report click on the attachment