IGI Logo

Strong operating performance to sustain

* MTCL’s simple and focused 4*4*4 growth strategy, investments in partnerships and whitespace opportunities led to superior growth in the last few quarters. Though Q2 performance will be difficult to replicate, we expect revenue growth momentum to sustain.

* In the mid-cap space, MTCL benefitted from its better footprint among F500 clients amid a strong rebound in technology spending. The sharp recovery in TTH and deferral of uptick in travel & other expenses also led to strong operating performance and earnings upgrade.

* The company is confident of delivering industry-leading double-digit revenue growth on the back of strong deal wins, a healthy deal pipeline and broad-based revenue growth. MTCL remains confident of delivering 20%+ EBITDAM in FY22 and aspires to maintain it.

* We raise our FY22-24E EPS by 2-9%, factoring in secular demand trends. We roll forward TP to Dec’22 and upgrade the stock to Hold with a revised TP of Rs4,450 at 36x Dec’23E EPS (Rs3,300 earlier), considering higher medium-term growth assumptions (Exhibit 7) and the correction in the stock price (~10% correction from peak).

Strong operating performance on the back of a sharp rebound in tech spending, better footprint among F500 clients and steady execution of its 4*4*4 growth strategy: MTCL’s steady execution of its well-devised ‘4*4*4 strategy’ that focuses on four verticals (RCM, BFSI, TTH and CMT), four service lines (Customer Success, Data and Intelligence, Cloud and Enterprise IT) and four geographies (NA, UK & Ireland, Continental Europe, APAC & ME) led to solid revenue growth in the last 4 quarters (7.6% CQGR). Customer experience, digital transformation, cloud and workplace modernization have seen accelerated demand. TTH has seen a healthy recovery as clients invested in contactless experience in the wake of the pandemic. MTCL works with several Fortune 500 companies (best footprint among Tier-II peers) that have accelerated their digital transformation agenda, thus driving healthy revenue growth for the company. It has identified and is investing in whitespace opportunities - Health, Security and Enterprise Applications, expansion into APAC/ME and Japan, IoT capabilities (NxT acquisition) to augment revenue growth. MTCL has also created a dedicated unit with hyperscalers (AWS, Azure, Google, ServiceNow, Salesforce) focusing on joint offerings-led GTM. The company’ focus on client mining and cross-selling has also worked as it has added 7 USD5mn+ and 6 USD10mn+ clients in the last four quarters. We expect revenue growth momentum to sustain on the back of strong deal wins (USD864mn in H1, 25% YoY), healthy deal pipeline and progress in account mining.

EBITDAM to sustain over 20% in FY22: MTCL has delivered strong expansion in EBITM in the last 8 quarters (9.3% in Q2FY20 to 18.2% in Q2FY22) on the back of revenue growth and intense focus on driving operating efficiencies. MTCL is confident of sustaining EBITDAM above 20% in FY22, factoring in sustained revenue growth momentum, benefits accruing from the WFH shift, a flattening pyramid (added more than 2,000 freshers in H1) and offshore shift negating the pressure from the shortage of talent. Management aspires to sustain EBITDAM within a narrow range in the medium term although the anticipated uptick in travel and other expenses (timing and pace of return remain uncertain) could weigh on margins.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer