Buy Tech Mahindra, says P Sekhar

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See previous views by P Phani Sekhar See what other Experts & Brokerages are saying about Tech Mahindra See messages about Tech Mahindra Tech Mahindra BSE | NSE 13/02/12 Are Mutual Funds betting on Tech Mahindra?

P Phani Sekhar of Angel Broking is of the view that one can buy Tech Mahindra .

Sekhar told CNBC-TV18, "Tech Mahindra is the 6th largest IT services exporter. But the real differentiator of Tech Mahindra is that it is into telecom vertical, which is relatively safer as compared to a BFSI vertical or maybe an enterprise solutions service being offered by its larger competitors. Having said that, there have been some short term concerns surrounding this especially related to the one time payments that it has made to secure some deals over the last 9-12 months and one of those deals with BTGS is not ramped up as per the expectations of the investors. But having said that, I believe that looking at the linage of this stock, the short term concerns offer an excellent opportunity to pick up this stock at throw away valuations."

He further added, "Coming back to the BTGS deal which has not exactly ramped up as per the expectations, as per our estimates, this deal should be on track this year and the latest deal that they have entered should also not be facing significant head winds. If you combine all this, we are looking at this stock growing its earnings by anywhere between 25-30% in a relatively uncertain environment for IT and IT when it self is being considered as a relatively defensive play, Tech Mahindra happens to be more defensive."

"There are some concerns about the free cash flow of Tech Mahindra and starting from this year, I believe they have also started improving and they will only improve going forward and all of these concerns have been more than factored in the price because such a stock is available today at a forward earnings of less than 10 times next year and at FY10, it is available at around 8 times and all this when you have a 2 year topline visibility. Its an excellent time to buy this stock. There is a 30% upside from a one year perspective."
 
Disclosure: Analyst doesn't hold the above stock.