Views on Tech Mahindra 3QFY2014 results - Angel Broking

Views of Ms. Ankita Somani (Research Analyst - IT, Angel Broking) on Tech Mahindra 3QFY2014 results:

"Tech Mahindra reported its 3QFY2014 results which surprised positively on the revenue front while came inline with the expectations on the operating margin. The dollar revenues grew by 4.4% qoq to US$791mn, led by volume growth of ~3.4% qoq. In INR terms, revenues came in at Rs. 4,889cr, up 2.7% qoq. During the quarter, the company's growth was aided by revenues coming in from recent acquisition of Mahindra Engineering Services (MES). The EBITDA margin of the company declined marginally by ~10bp qoq to 23.2% (estimate - 23.3%), largely because of increase in employee costs. Reported profit came in at Rs. 1,010cr, up 41% qoq; Tech Mahindra had exceptional gain of ~ Rs. 347cr due to tax writebacks and other provision reversal, adjusting to that PAT came in lower than estimates at Rs. 663cr, down 8% qoq, due to loss at other income level of Rs. 46cr as against gain of Rs. 38cr in 2QFY2014.

The company reported net addition of 2,165 employees, highest in last nine quarters, on account of acquisition of MES. Management expects non-BT telecom business to grow in line with company average and above Telecom sector average. Management indicated that the company is witnessing pick up in discretionary spending and a strong deal pipeline in IMS, where Tech Mahindra is actively gaining market share through renewal deal wins. We continue to remain positive on Tech Mahindra and maintain Accumulate rating on the stock."

Source : Equity Bulls

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