Prabhudas Lilladher is bullish on Tech Mahindra has recommended buy rating on the stock with a target price of Rs 915 in its research report dated February 05, 2019.
Prabhudas Lilladher's research report on Tech Mahindra
Tech M delivered steady performance with beat on revenues, PAT and margins inline our estimates. Tech M revenue growth was second best among Top Tier IT peer set (TCS/Infosys/Wipro/HCLT delivered 1.8/2.7/2.4/5.6% QoQ constant currency revenue growth for Q3FY19). Company remained confident on revenue growth outlook and We believe that 5G led uptick can be a potential trigger for Communication vertical in FY20E. We see scope for cyclical upturn in Telecom vertical (41% of Tech M's total revenues) in FY20E which could swing consolidated revenue growth trajectory in FY20E. Led by beat on revenues and PAT in Q3FY19, we model USD revenue growth at 4.8/7.1/9.3% for FY19/FY20/FY21E. Our EBITDA Margin assumptions are at 18.3/18.6/19% for FY19/FY20/FY21E (vs 18.1/18.6/19% modelled earlier).
Our EPS estimates are at Rs49/57/65 per share for FY19/FY20/FY21E (vs 48/57/53 modelled earlier). Stock is currently trading at 13.2x FY20E EPS and 12.3x Sep20E EPS and remain cheap. We raise our TP by 3.4% to Rs915 at 15x Sep20E EPS. Retain Buy.
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