Motilal Oswal's research report on Tech Mahindra
Tech Mahindra (TECHM) reported 2QFY25 revenue of USD1.6b, up 0.7% QoQ in constant currency (CC) vs. our estimate of 0.2% QoQ CC. The growth was driven by Retail/Technology (up 5.6%/5.7% sequentially). Communication/BFSI also witnessed growth of 2.7%/2.4% QoQ, while Manufacturing declined 4% QoQ. EBIT margin expanded 110bp QoQ at 9.6%, beating our estimates of 9.0%. Adj. PAT stood at INR12.5b (est. INR10b), up 46% QoQ/28% YoY due to operating leverage and higher other income. For 1HFY25, revenue/EBIT/PAT grew 1.1%/13.7%/8.7% vs. 1HFY24. We expect revenue/EBIT/PAT to grow by 4%/44%/27% YoY in 2HFY25. Deal TCV was USD603m, up 13% QoQ/ down 6% YoY.
Outlook
We remain on the sidelines as we feel the current valuation fairly factors in the uncertainties around growth and margin. We reiterate our Neutral rating on the stock and upgrade our target multiple to 25x Sep’26 EPS. Our TP of INR1,700 implies a 1% upside.
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