Tech Mahindra - Q4FY13 Result Review - Angel Broking

Tech Mahindra reported better than expected revenue growth but disappointed slightly on the operational margin front. The dollar revenues came in at US$353.2mn, up 7.2% qoq, aided by acquisition of HGS and Comviva. USD revenues from non-BT accounts grew by ~13.3% qoq to US$265mn. Revenue from BT declined by 7.6% qoq and BT now contributes 25% to revenues 37% in 4QFY2012. In INR terms, the revenue came in at Rs. 1,907cr, up 6.5% qoq. The two acquisitions which the company did - HGS and Comviva - has got lower margin profile than company average, due to which EBITDA margin of the company declined by ~105bp qoq to 19.9%. The company's utilization level went up by ~100bp qoq to 77%, majorly because of reduction in its employee base by 1,560 employees. Management indicated that US is on a path of recovery in terms of IT send from telecom clients while Europe still remains patchy. Deal pipeline of the company from emerging markets remains strong. The consolidated reported PAT came in at Rs. 377cr while adjusted PAT (adjusting for exceptional item in Mahindra Satyam) came in at Rs. 320cr, down 20% qoq.

The overall results were healthy on the back of acquitsions and new deals. The Management indicated that the proposed Tech Mahindra - Satyam merger had been approved by the Bombay High Court, while it awaits the Andhra Pradesh High Court approval. Management indicated that hearings at Andhra Pradesh High Court are complete and the judgment has been reserved and expects that the judgment will become available in the first two weeks of June. We continue to remain positive on the stock with Buy rating on it. The target price is currently under review.

Source : Equity Bulls

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