Operational revenue grew 3.6% at Rs 80.54 billion on sequential basis. In dollar terms, Tech Mahindra reported 2.9% sequential growth in revenue at $ 1,244 million during the quarter.
Analysts on an average had expected profit of Rs 9.32 billion and revenue of Rs 79.42 billion for the quarter.
Tech Mahindra has reported 120bps improvement in EBITDA margins for the quarter at 17.5% led by sharp improvement in utilization, seasonal tailwind from mobility business, improved business mix and favourable currency. Company has reported margin beat in each of the four quarters in FY18 and Q4FY18 EBITDA margin is up 550bps YoY.
“The company is confident of the FY19 demand outlook, with improvement in growth in telecom business and expects enterprise business to grow in line with industry growth. There is lot of activity on 5G technology however; it is difficult to give a timeline for 5G related spends. Company expects further benefits from the margin improvement program to accrue over next 4 quarters driven by automation, improvement in performance of portfolio companies and increase in offshore proportion,” analysts at Antique Stock Broking said in Q4FY18 result review.
Tech Mahindra has done exceedingly well on the margin front in FY18. We believe that improvement in revenue growth trajectory would be key to further re-rating of the stock. We retain BUY on Tech Mahindra and increase the target multiple to 16x (from 15x) and raise target price to Rs 792 based on 16x FY20 EPS, the brokerage firm added.
However, analysts at Emkay Global Financial Services maintain ‘reduce’ rating on the stock with 12 month target price of Rs 640.
“Taking into consideration the hazy growth outlook provided for its communication business and muted deal TCV growth over the past few quarters, we keep our revenue growth estimates (8% CAGR over FY18-FY20E) intact but increase margin estimates slightly on good execution in FY18. However, the valuation is already capturing the growth prospects and thus maintain our REDUCE rating stock,” the brokerage firm said in a result update.
In past one year, Tech Mahindra had outperformed the market by surging 65% as compared to 13.6% rise in the S&P BSE Sensex till Friday.