Buy Tech Mahindra; target of Rs 550: Axis Direct
Axis Direct’s research report on Tech Mahindra
TechM reported revenue growth of 3.6% QoQ (Organic: +2.4%, CJS: ~USD 14 mn, CC: 2.3% QoQ) to USD 1,179 mn (AxisCapE/Cons.: USD 1,165 mn/USD 1,172 mn). EBITDA margin up 180 bps QoQ at 14.5% led by utilization uptick, lower headcount, and absorption of visa costs. Reported EPS grew 4.7% QoQ to Rs 9.4 (AxisCapE/Cons.: Rs 7.02/ Rs 8.27), led by higher EBITDA. TCV win of USD 340 mn+ in Q2FY18 led by 1 large deal win in each Telecom and Enterprise.
We believe low running expectation for revenue growth and margin improvement leaves room for positive surprise. We have a BUY rating and target price of Rs 550 (14x FY19E EPS). At the CMP of Rs 489, the stock trades at 13x/ 12x FY18E/FY19E.
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