Buy Tech Mahindra; target of Rs 950: Dolat Capital
Dolat Capital’s research report on Tech Mahindra
Company won deals worth USD 440mn in the quarter. Of these, USD 240mn was in the communication vertical and USD 200mn in enterprise. Deal wins in the communication vertical are wide spread and all in upcoming transformation areas of 4G/5G network. We believe recovery in the communication vertical with a healthy deal inflow will aid margin and profitability in the near to medium term. We expect TECHM to report a USD revenue growth of 4.7%/10%/10.2% in FY19E/FY20E/FY21E. However, the management believes that margin expansion to be moderate helped by digital revenue and synergy between portfolio companies.
The stock trades at an inexpensive valuation of 13.1x/11.1x FY20/FY21 earnings. We continue to prefer TechM within our large cap IT universe, and maintain BUY with a TP of ` 950 based on 15x one yr. fwd. PER.
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