Buy Tech Mahindra Ltd For Target Rs.R1,400 - Anand Rathi Share and Stock Brokers
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* The company reported good revenue growth for the quarter under review. Revenue from operations improved by 20.7% YoY to ?131,295 million on consolidated basis. In constant currency (CC) terms the revenue grew by 16.8% YoY. The company reported healthy revenue growth led by better performance across all regions - Americas, Europe & RoW.
* The company achieved a strong broad based growth across the industries it serves. Communication Media and Entertainment (CME), Manufacturing, Technology, BFSI, Retail and others grew YoY by 10.3%, 11.1%, 25.5%, 11.0%, 16.4% & 0.0% respectively in constant currency.
* The company achieved net new large deals of $0.7 billion in Q2-FY23.In both the Communication Media and Entertainment (CME) & Enterprise business vertical the company has witnessed growth consistently over the last few quarters by winning large deals including significant wins in the 5G space, digital transformation and adoption of cloud.
* On profitability front, the EBITDA from operations for the quarter declined by 1.8% YoY at ?19,597 million with a margin of 14.9%. The company achieved the reported PAT of ?12,724 million, a decline of 13.3% YoY with a net margin of 9.7% translating into EPS of ?14.52 per share for the quarter.
* Employee attrition was at 22.0% and employee utilisation was 85% during the quarter. The employee head count as on period end of Q2-FY23 stood at 163,912 - higher by 16.1% compared to previous year. To keep the operating margins intact, the company is hiring fresher’s and executing more work offshore to bring down the average cost down in addition to increasing price for its customers.
* The company has been making investments in its digital engineering capabilities and is now in good position to provide engineering capabilities in the Metaverse ecosystem, from network to devices to applications and use cases, or for that matter, offering software product development and capabilities there in.
* The company continues to get positive demand across sectors, however it is facing higher employee attrition and margin pressure due to higher employee expenses. We maintain our BUY rating on the stock with a revised target price of ?1400 per share.
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