Motilal Oswal's research report on Tech Mahindra
Tech Mahindra (TECHM) reported 1QFY25 revenue of USD1.5b, up 0.7%QoQ in CC vs. our estimate of 0.4% QoQ CC. The weakness was primarily due to a continued slowdown in CME (down 2.0% QoQ). Banking and Technology were flat QoQ, while Manufacturing showed continued strength with 2.4%QoQ growth. EBIT margin was up 110bp QoQ at 8.5% (est. 7.7%). TCV stoodat USD534m (+6.8% QoQ/+48.7% YoY). Adj. PAT stood at INR8.5b (est.INR8.1b), up 29% QoQ, due to lower sub-con costs and SG&A costs. We remain positive about the restructuring at TECHM under the newleadership and believe this quarter was another step in the right direction.But we expect the impact from these steps to be visible gradually. Further,TECHM’s presence in the communications segment, which remains undernotable duress, makes the new management’s job that much harder.
Outlook
We remain on the sidelines as we feel the current valuation fairly factors in the uncertainties around growth and margin. Our FY25/FY26 EPS estimates remain broadly unchanged. We remain Neutral on the stock and upgrade our target multiple to 23x FY26E EPS. Our TP of INR1,470 implies a 5% downside.
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