Buy Tech Mahindra; target of Rs 880: HDFC Securities

HDFC Securities is bullish on Tech Mahindra has recommended buy rating on the stock with a target price of Rs 880 in its research report dated February 06, 2019.

Broker Research

February 14, 2019 / 15:43 IST

HDFC Securities' research report on Tech Mahindra

Tech Mahindra delivered healthy performance both on revenue and margin front. Revenue stood at USD 1,261mn (+3.5% QoQ, +4.3% CC), ahead of our est of USD 1,244mn. Enterprise (59% of rev) grew 4.2% QoQ led by Digital (33% of rev, +10% QoQ) and recovery in Manufacturing and BFSI. Management expects Enterprise segment to grow at ~10% CC YoY led by increased Digital adoption and strong TCV wins (USD 490mn in last two quarters). Telecom (41% of rev, +2.5% QoQ) growth was led by new deal wins. Spend related to 5G roll-out in USA will provide further thrust to Telecom growth. Net new TCV stand at USD 440mn, out of which USD 200mn is Enterprise and USD 240mn is Telecom (provides growth visibility and exit rate for 4Q will be strong).

Outlook

Tech Mahindra is available at ~17% discount to Tier-1 IT average. Maintain BUY with a TP of Rs 880 based on 15x Dec-20E earnings.

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