Tech Mahindra gains 7% post Q1 results

Thus far in 2017, the stock was down 21% against 22% rise in Sensex till Monday.

Tech Mahindra has rallied 7% to Rs 414 on BSE in early morning trade after the company reported a better-than-expected 6.5% growth in its consolidated net profit of Rs 799 crore in June quarter (Q1FY18). Revenues grew 6% to Rs 7,337 crore, beating Street estimates.

Analysts, on an average, had expected profit of Rs 612 crore on revenues of Rs 7,311 crore from the country's fifth largest IT services firm.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) margin improved 70 bps sequentially at 12.7%.

CEO and managing director CP Gurnani said despite all the headwinds in a seasonally weak quarter, the company's digital business grew ahead of expectations.

"Our performance during the quarter reaffirms the early success of our D.A.V.I.D strategy and the journey we have undertaken to become a leading Digital Transformation Company," Gurnani added.

“EBITDA margin expansion of 70bps QoQ versus expectations of 20bps expansion sprung a positive surprise. Further, improvement is on the anvil as the company improves the growth trajectory and pulls on levers like utilisation, pyramid rationalisation and G&A optimisation. Full quarter benefit of the head count rationalisation will accrue in 2QFY18. We reiterate our thesis of margin improvement being the key trigger for valuation re-rating,” analysts at Antique Stock Broking said in Q1FY18 result review.

Meanwhile, thus far in the calendar year 2017, the stock had unperformed the market by falling 21% as compared to 22% rise in the S&P BSE Sensex till Monday.