Prabhudas Lilladher's research report on Tech Mahindra
Tech Mahindra’s (TECHM’s) Q2FY17 revenues and margins were ahead of estimates. Revenues grew 5% QoQ in CC terms and organic growth was 2.5%. Revenue growth was aided by recovery in Telecom vertical which grew 2.4%QoQ after a weak performance in the past few quarters. EBIT margins were largely inline with estimates. Company took a one‐time, restructuring charge of US$13m in the quarter which impacted margins by 120bps.
Management has indicated improved outlook in Telecom business and Enterprise business remains steady. TECHM signed three large deals in the quarter. We expect gradual recovery in the business, going forward. Stock is inexpensive at 11.5x FY18 EPS and improvement in performance should drive stock returns. Retain “BUY” with a TP of Rs525.
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