Tech Mahindra Q1 net may rise 1.4% at Rs 382.5 cr: MOST

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for the information technology sector. The brokerage house expects Tech Mahindra to report a 1.4 percent growth quarter-on-quarter (rise of 13 percent year-on-year) in net profit at Rs 382.5 crore.

Revenues are expected to increase by 3.4 percent Q-o-Q (up 27.8 percent Y-o-Y) to Rs 1,972.5 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 6 percent Q-o-Q (up 22 percent Y-o-Y) to Rs 402.9 crore.

Motilal Oswal report on Tech Mahindra

We model 1.2 percent Q-o-Q growth for Tech Mahindra, taking USD revenue to USD 356 million. In rupee terms, our revenue estimate is INR 19.7 billion, 3.4 percent Q-o-Q.

We expect EBITDA margin for Tech Mahindra to increase 50bp Q-o-Q on account of rupee depreciation.

For Satyam, revenue growth is likely to be higher in 1QFY14E, aided by two months integration of Complex IT. At USD 375 million, we expect
revenue at Satyam to grow 4.6 percent Q-o-Q. In rupee terms, our revenue estimate is INR 20.8 billion on the back of integration of Complex IT.

We expect EBITDA margin decline of 10bp Q-o-Q to 20 percent for Mahindra Satyam on account of merger of low margin Complex IT business. On a like-to-like basis, margins should improve during the quarter.

Our PAT estimate is INR 3.14 billion, down 2.2 percent Q-o-Q, due to higher tax rate (27.8 percent v/s 18.9 percent in 4Q) and lower other income (INR 608 million v/s INR 723 million in 4Q).

On merged basis our PAT estimate is INR 5.97 billion, -6.3 percent Q-o-Q, largely driven by extra ordinary income in satyam of INR 1.34 billion last quarter.

Tech Mahindra trades at 10.6x FY14E and 8.7x FY15E .