Tech Mahindra - No surprise on revenue, ahead on margins - Nomura

Tech Mahindra 3QFY13 results were ahead of expectation on margins and PAT. Revenues were in line with our expectations with flat q-q growth on an organic basis in TechM, mirroring the trend at Mahindra Satyam (SCS IN, Not Rated). Margin surprise of 80bps q-q was led by 1) headcount curtailment of ~3,000 people (~6% of overall headcount) and 2) ~60bp benefit to margins from higher-than-normal margins at Comviva due to seasonality, on our estimates.

PAT was ahead of expectation driven by the margin beat and higher other income. Post the results at TechM and Satyam, we believe the combined entity is less likely to surprise on revenues as BT declines continue, headcount curtailments do not provide comfort and deal flow in the non BT segment is largely built in.

Overall, we do not see a material change to our earnings estimates (INR97/103 over FY14/15F on proforma TechM + Satyam combined entity). Maintain Neutral.

Source : Equity Bulls

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