Tech Mahindra Ltd - Margins drive beat, retain ACCUMULATE - Emkay

Reco: ACCUMULATE
CMP: Rs 762
Target Price: Rs 840

- Tech Mahindra reported inline revenues at ~US$ 281 mn (flat QoQ) with margins improving by ~450 bps QoQ to 21.4% aided by weak currency (300 bps) and cost rationalization.

- Profits at Rs 3.4 bn (+12% QoQ, +24% YoY) beat estimates driven by margin beat. Note that Tech M has improved gross margins by ~550 bps in the past 2 qtrs.

- Non BT revenues increased by 1.4% QoQ led by rampups in Top 2-5 client revenues (+8.6% QoQ) with BT revenues down by ~3% QoQ.

- Tweak standalone Tech M EPS higher by 7/5% driven by higher margin est. Pro forma FY13/14E EPS upped by ~4/2% each. Raise TP to Rs 840/98 for Tech M and Mah Satyam.

Source : Equity Bulls

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