Motilal Oswal 's research report on Tech Mahindra
TechM's resilience in revenue (-5% QoQ, CC), especially in Enterprise, is encouraging given the current context. Decline in Communications (8.2% QoQ) was on expected lines given the overhang in Network Services. The margin surprise was led by better-than-expected control on SG&A costs. Understandably, net new deal wins (USD290m) were weaker than the usual run-rate. Despite the elongated decision-making cycles, the company hinted at improving deal pipeline. Revenue and margins are expected to improve from hereon. Relatively higher client concentration and the resultant impact on pricing and working capital were key concerns initially. However, management commentary suggests these are not insurmountable. Ramp-up in recently won mega deals was largely on track, a key positive. -
Outlook
We upgrade our EPS estimates over FY21-22E by 17% as we revisit our growth and margin trajectory in light of the surprise in 1QFY21 and optimistic commentary. Remain NEUTRAL.
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