Tech Mahindra - Q4FY21 Result Update - YES Securities

Result Highlights

- Reported USD revenue of $1,330mn (up1.6% QoQ). In INR terms, revenue was Rs 97.3 bn (up 0.9% QoQ) - slightly below consensus estimate. The INR revenue growth was also impacted by INR appreciation during the quarter.

- Growth was broad based with BFSI (+5% QoQ) being the key performer, followed by Manufacturing (1.9% QoQ), Communications (1.3% QoQ)

- EBIT margin grew by 55 bps QoQ to 16.5%, led by continued focus on cost optimization

- Deal win for the quarter stood at $1,043 mn (5 quarter high deal booking)

- LTM attrition stood at 13% in the quarter vs 12% in 3QFY21

- Utilization level remained flat QoQ at strong 87% for the quarter.

- Cash and equivalents increased by Rs11.5bn QoQ to Rs 130.2bn

- The Board has proposed a Final Dividend of Rs15/- per share (300%) and a Special Dividend of Rs15/- per share (FY21 Dividend is Rs45/share).

- Strong deal win to support double digit revenue growth in FY22. Margin has been better than target range of 15% and this will enable management to make investment for growth

Our view: For Q4FY21, the margin performance was robust while the revenue was below expectation. Strong deal pipeline would help it to post double digit revenue growth in FY22; while optimization of margin levers would enable it to manage 15%+ EBIT margin in FY22, factoring in the wage hike being implemented from April quarter. The company has been using acquisitions to generate growth and optimize its service portfolio. The valuation remains attractive as the stock trades at PE of15x on FY23 earnings, given better growth outlook. Initiate coverage on the stock with ADD rating.

Shares of TECH MAHINDRA LTD. was last trading in BSE at Rs.969.25 as compared to the previous close of Rs. 963.15. The total number of shares traded during the day was 453597 in over 16344 trades.

The stock hit an intraday high of Rs. 985.65 and intraday low of 944.5. The net turnover during the day was Rs. 436559354.

Source : Equity Bulls

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