Tech Mahindra gains 8% as margins impress in Q2
The stock moved higher by 8% to Rs 741 on the BSE after the company's Ebitda margins in September quarter expanded 240bps at 18.8%
 "Tech Mahindra")
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The company is pushing the non-linearity drive because headcount growth as a proportion of revenue growth is on the decline
Shares of Tech Mahindra have moved higher by 8% to Rs 741 per share on the BSE in intra-day trade after the company’s Ebitda (earnings before interest, tax, depreciation and amortization) margins in the September quarter (Q2FY19) expanded 240 bps sequentially at 18.8%, mainly led by operational efficiencies and currency tailwinds. On a year-on-year basis, Ebitda margins were improved by 430 bps.
India’s fifth-largest IT services company Tech Mahindra reported an 18.5% QoQ rise in its consolidated net profit at Rs 10.64 billion in Q2FY19. Revenue grew 13.5% at Rs 86.30 billion over the previous quarter. In constant currency terms, revenue was up 0.4% sequentially.
“The softness in enterprise offsets the strong performance and commentary on telecom, driving a minor downward revision to our revenue estimates. However, the strong margins performance comes in as equipoise, leaving earnings unchanged. We expect revenue/EPS CAGR of 6/12% over FY18-20. At 14.3/12.7x FY19/20E, Tech Mahindra’s valuations are attractive, considering the rerating potential from sustained Telecom growth,” Motilal Oswal Securities said in result update with ‘buy’ rating on the stock and target price of Rs 800.
“The company remained confident on revenue growth outlook in the communication vertical in H2FY19 (October-March). We believe that 5G led uptick can be a potential trigger for communication vertical in FY20E. We see scope for cyclical upturn in telecom vertical (41% of Tech Mahindra’s total revenues) in FY20E which could swing consolidated revenue growth trajectory in FY20E,” analysts at Prabhudas Lilladher said in result update. The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 885 per share.
At 11:37 am; Tech Mahindra was trading 7% higher at Rs 732 on the BSE, as compared to 0.18% decline in the S&P BSE Sensex. The trading volumes on the counter jumped more than five-fold with a combined 8.81 million equity shares changed hands on the BSE and NSE so far.
India’s fifth-largest IT services company Tech Mahindra reported an 18.5% QoQ rise in its consolidated net profit at Rs 10.64 billion in Q2FY19. Revenue grew 13.5% at Rs 86.30 billion over the previous quarter. In constant currency terms, revenue was up 0.4% sequentially.
“The softness in enterprise offsets the strong performance and commentary on telecom, driving a minor downward revision to our revenue estimates. However, the strong margins performance comes in as equipoise, leaving earnings unchanged. We expect revenue/EPS CAGR of 6/12% over FY18-20. At 14.3/12.7x FY19/20E, Tech Mahindra’s valuations are attractive, considering the rerating potential from sustained Telecom growth,” Motilal Oswal Securities said in result update with ‘buy’ rating on the stock and target price of Rs 800.
“The company remained confident on revenue growth outlook in the communication vertical in H2FY19 (October-March). We believe that 5G led uptick can be a potential trigger for communication vertical in FY20E. We see scope for cyclical upturn in telecom vertical (41% of Tech Mahindra’s total revenues) in FY20E which could swing consolidated revenue growth trajectory in FY20E,” analysts at Prabhudas Lilladher said in result update. The brokerage firm maintains ‘buy’ rating on the stock with target price of Rs 885 per share.
At 11:37 am; Tech Mahindra was trading 7% higher at Rs 732 on the BSE, as compared to 0.18% decline in the S&P BSE Sensex. The trading volumes on the counter jumped more than five-fold with a combined 8.81 million equity shares changed hands on the BSE and NSE so far.