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Tech Mahindra - Q1FY22 First Cut - ICICI Direct

Posted On: 2021-08-01 06:02:54 (Time Zone: UTC)

(CMP: Rs. 1,128, MCap: Rs. 1,09,312 crore)

Tech Mahindra (TechM) reported healthy set of Q1FY22 numbers and were above our estimate. The company's revenues increased by 3.9% QoQ in constant currency terms (above our estimate of 2.5% QoQ in CC terms) mainly led by 4.5% QoQ growth in Enterprise revenues and 2.9% QoQ growth in communications. Within enterprise the growth was driven by Manufacturing (up 4.7% QoQ) Technology (up 7.7% QoQ) and Banking, financial services & insurance (up 4.1% QoQ). In terms of geography the growth was led by US (up 6.8% QoQ) and Europe (up 6.8% QoQ). The company's EBIT declined 81 bps QoQ to 15.2% (above our estimate of 14.5%) which we believe is mainly led by wage hike. The company's order book has increased from US$290 million in Q1FY21 to US$815 million in Q1FY22.

Q1FY22 Earnings Summary

- The company's revenue increased by 3.9% QoQ in constant currency. US$ revenues increased by 4.1% QoQ to $1,383.6 million (above our estimate of 2.6% QoQ growth to $1,364.2 million)

- Rupee revenues increased by 4.8% QoQ to Rs. 10,198 crore (vs. our Rs. 10,064 crore estimate)

- EBIT margin decreased by ~81 bps QoQ to 15.2% (vs. our estimate of 14.5%) which we believe is due to wage hike

- Reported PAT was increased 25.1% QoQ at Rs. 1,353 crore mainly due to higher other income

The company reported healthy revenue growth in line with large cap peers. It has also shown healthy traction in order book. This coupled with traction in digital technologies, improving 5G spend (on communication & enterprise side), large deals and acceleration in Europe bode well for the company's revenue growth. We would be revisiting our estimates and target price shortly.

Shares of TECH MAHINDRA LTD. was last trading in BSE at Rs. 1209.45 as compared to the previous close of Rs. 1127.75. The total number of shares traded during the day was 937708 in over 34150 trades.

The stock hit an intraday high of Rs. 1237 and intraday low of 1175.05. The net turnover during the day was Rs. 1140509288.

Source: Equity Bulls

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