01-01-1970 12:00 AM | Source: Yes Securities Ltd
Add Tech Mahindra Ltd For Target Rs. 1,025 - Yes Securities
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Result Highlights

* Reported USD revenue of $1,330mn (up1.6% QoQ). In INR terms, revenue was Rs 97.3 bn (up 0.9% QoQ)  ‐  slightly below consensus estimate. The INR revenue growth was also impacted by INR appreciation during the quarter.  

* Growth was broad based with BFSI (+5% QoQ) being the key performer, followed by Manufacturing (1.9% QoQ), Communications (1.3% QoQ)

* EBIT margin grew by 55 bps QoQ to 16.5%, led by continued focus on cost optimization

* Deal win for the quarter stood at $1,043 mn (5 quarter high deal booking)

* LTM attrition stood at 13% in the quarter vs 12% in 3QFY21

* Utilization level remained flat QoQ at strong 87% for the quarter.

* Cash and equivalents increased by Rs11.5bn QoQ to Rs 130.2bn

* The Board has proposed a Final Dividend of Rs15/‐ per share (300%) and a Special Dividend of Rs15/‐ per share (FY21 Dividend is Rs45/share).

* Strong deal win to support double digit revenue growth in FY22. Margin has been better than target range of 15% and this will enable management to make investment for growth

 

Our view:  

For Q4FY21, the margin performance was robust while the revenue was below expectation. Strong deal pipeline would help it to post double digit revenue growth in FY22; while optimization of margin levers would enable it to manage 15%+ EBIT margin in FY22, factoring in the wage hike being implemented from April quarter.  The company has been using acquisitions to generate growth and optimize its service portfolio. The valuation remains attractive as the stock trades at PE of15x on FY23 earnings, given better growth outlook. Initiate coverage on the stock with ADD rating.

 

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