Tech Mahindra is likely to report mute December quarter earnings. According to CNBC-TV18 poll, the IT company's net profit may slip 3.6 percent at Rs 757 crore in Q3FY16 from Rs 785.6 crore on sequential basis. Its dollar revenue is likely to be marginally up 0.9 percent at USD 1020 million versus USD 1011 million while rupee revenue may jump 1.7 percent at Rs 6728 crore versus Rs 6616 crore quarter-on-quarter.
Revenue growth in Q3 is seen at 1 percent while constant currency growth may be at 1.5 percent.
In Q3, EBIT is seen at Rs 956 crore against Rs 903.7 crore and EBIT percentage at 14.2 percent versus 13.65 percent (QoQ).
According to analysts polled by CNBC-TV18, Q3 may again be a soft quarter for the telecom vertical due to furloughs. It has relatively smaller presence in Chennai, the impact is likely to be in the range of 10-20 basis points (bps). Cross currency headwind may be 50-60 bps.
Margin is seen expanding by 50-60 bps (QoQ). No major headwind/tailwind seen so margins may recover on a low base. Earlier, the management had said it is pursuing five large deals currently, three of its top-5 clients have announced large acquisitions which will drive higher IT services spend.
Tech Mahindra recently acquired Pininfarina, in a joint venture with M&M. Tech Mahindra to hold 60 percent and M&M to hold 40 percent in the JV. Pininfarina is a Italian car design firm, known for its on Alfa Romeo, Maserati and Peugeot.
The stock has been a significant underperformer in 2015. Softness in telecom & steep margin correction were the key areas of concern. Improvement in telecom vertical and roadmap for margin improvement will be key stock driver.
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