Thursday, July 23, 2009

[Investors Please Listen] Tech Mahindra Q1FY10 Result Update ; In line operational results; though top client woes continue ; ACCUMULATE ; Target: Rs742

CMP: Rs770                           Target Price: Rs742


TechM reports revenues of US$ 228 mn(+7.7% QoQ) V/s expectations of ~US$ 223 mn

Reported op margins at 25.2% (-180 bps QoQ) up 20 bps sequentially adjusted for Q4FY09 one off.

Top client woes continue with revenues from top client down marginally QoQ to GBP 75.9 mn. However are negatively surprised by management's stance on not sharing revenue contribution from the BTGS and the ANDES contracts (given deal payment terms). We would not be surprised by a negative reaction on the stock price from this.

Revise standalone EPS Estimates for FY10/FY11 to Rs 40.9/47.6 V/s Rs 41.9/45.9 earlier driven by change in tax rate assumptions  

Consolidated base case EPS estimates revised to Rs 58.1/67.1 for FY10/FY11 (as against Rs 62.6 and Rs 67.5 earlier) on a/c of change in assumption to consolidate ~42.7%profits from Satyam (V/s an assumption of ~51% earlier)

Maintain ACCUMULATE with a revised TP of Rs 742 (V/s Rs 550 earlier) based on 11x FY11 Consolidated FY11 EPS estimates of Rs 67.5.        

 


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