Views on Tech Mahindra - Investor Update: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - IT, Angel Broking) on Tech Mahindra - Investor Update:

"Company indicated that in FY2016, organic communication growth which is the main domain of the company (~ 52% of sales in FY2015) could remain subdued due to delayed decision making, though the deal pipeline remains healthy. In the Enterprise business, this registered healthy organic growth in the year gone by. Management's endeavour will be to grow Enterprise business in line or above Industry in FY2016.

For 1QFY2016, the company has indicated some headwinds and tailwinds, which could see of risk of marginal decline in both revenue & EBDITA Margins on sequential basis. Seasonally weak mobility business is expected to be a drag on the organic 1QFY2016 revenues and margins. H1B visa costs will be another drag on the margins. Favourable currency movements could help both revenue and Margins. However, the company has indicated that it has renewed focus on improving operational leverages and cost control parameters, however the impact of the same would be visible only from 3QFY2016 onwards.

Company expects the improved performance, coming in through the 3QFY2016, thus an improved FY2017 both in terms of revenue visibility and profitability. Thus we maintain our numbers and target for FY2017, though FY2016 could be tweaked. Also after factoring in marginal improvement in the margins in FY2017, the stock is attractively valued. We have reduced the FY2016 sales and net profit numbers by 5% and 6% respectively. We maintain our BUY with a price target of INR 646."

Shares of TECH MAHINDRA LTD. was last trading in BSE at Rs.486.5 as compared to the previous close of Rs. 478.2. The total number of shares traded during the day was 311719 in over 9329 trades.

The stock hit an intraday high of Rs. 488.25 and intraday low of 476.95. The net turnover during the day was Rs. 150931905.

Source : Equity Bulls

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