Tech Mahindra Q3 PAT may rise 2.6% at Rs 667.1cr: MOST

Motilal Oswal has come out with its October-December quarter earnings estimates for the information & technology sector. The brokerage house expects Tech Mahindra to report a 2.6 percent degrowth quarter-on-quarter (up 131.6 percent Y-o-Y) in net profit at Rs 667.1 crore.

Sales of Tech Mahindra are expected to increase by 1.6 percent Q-o-Q (up 32.1 percent Y-o-Y) to Rs 4847.2 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 1.1 percent Q-o-Q (up 41.2 percent Y-o-Y) to Rs 1123.3 crore.

Motilal Oswal on Tech Mahindra:

We expect revenue to grow 3.1 percent QoQ to USD 782 million, aided by large deal traction and pick-up in demand for Enterprise Business Solutions (EBS, 20 percent of Satyam's revenues) and Business Intelligence (5-6 percent of revenues).

In INR terms, we expect revenue growth of 1.6 percent QoQ to INR 48.5 billion.

Our SGA assumption for the quarter is 16.5 percent (v/s 16.3 percent in 2QFY14).

We expect EBITDA margin to decline by 10bp QoQ to 23.2 percent on account of 70bp drop in utilisation due to shutdown and furloughs experienced during the quarter.

Our PAT estimate is INR 6.67 billion (after adjusting for restructuring fees), a decline of 2.5 percent QoQ. This implies PAT margin of 13.8 percent, down 60bp QoQ due to higher forex losses (INR 910 million v/s INR 260 million in 2QFY14). Our other income estimate is a loss of INR 278 million v/s a gain of INR 380 in 2QFY14.

The stock trades at 15.1x FY14E and 12.7x FY15E EPS.

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