Religare's research report on Tech MahindraTECHM reported a mixed Q3 with muted 0.4% QoQ US$ revenue growth (+1.2% CC) but a 66bps QoQ expansion in margins to 14.36%, which came in slightly better than estimates. PAT at Rs 7.6bn beat expectations on higher other income. Overall CC revenue growth was slightly below estimates, but valuations at 13.2x FY17E are cheap. While margin repair remains on track, growth recovery would be a key re-rating catalyst. We largely maintain estimates and roll over to a Mar’17 TP of Rs 610 (from Rs 600). BUY.Overall, Q3FY16 was a mixed quarter for TECHM with steady margin improvement but muted growth. While telecom remains a drag on growth, we note that current valuations at 13.2x FY17E already factor this in. We think steady margin improvement will support EPS in the near term while growth recovery remains the key trigger in the medium term. We largely maintain our FY17/FY18 estimates.For all recommendations, click here 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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