Buy Tech Mahindra; target of Rs 1300: Dolat Capital

Dolat Capital`s research report on Tech Mahindra

"Tech Mahindra reported 6.5 percent QQ growth despite challenging business outlook in the Telecom vertical driven by strong traction in the Non BT clients and full quarter integration gains from Comviva acquisition. We remain positive on the stock in view of its renewed proactive efforts to drive the revenue momentum, confident outlook, integration gains from Satyam and compelling valuations (8x FY14E earnings).” Also Read: How broking firms rate Tech Mahindra's Q4 results “Tech Mahindra believes that the demand from the European Telecom clients has been soft owing to economic crisis but has been ticking up in slow but steady manner as cost efficiency through outsourcing remains the only viable option. US market is witnessing uptick in spends on both traditional as well as on the discretionary side. Also, the broad basing of client portfolio would also help in sustaining traction. Total client count has gone up to 154 from 130 in FY12. It has bagged 5 new deals in the quarter. BT revenues have slipped by about 7.6 percent in the quarter owing to the ongoing internal re-jig in structure. It is likely to see some more cuts in discretionary spends in Q1FY14 and thereafter likely to contain the downfall. BT revenues have declined by 11 percent for the year and now account just 25 percent of the revenue run rate. We have built in -11 percent and 2 percent revenues growth for FY14/15E.” “The revenues are likely to be driven by integration of acquired entities (HGS and Comviva) as well as strong new deal closures (closed 5 deals across geographies). We believe strong structural growth along with OPM efficiency would drive the overall metrics of the company and thus the revision in rating. We maintain our Buy recommendation on the stock with a target price of Rs 1300, valued at 10x of FY15E earnings,” says Dolat Capital research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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