Tech Mahindra- Margins disappointment, cut to HOLD: Emkay

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Tech Mahindra

Margins disappointment, cut to HOLD

HOLD

CMP: Rs 735                                       Target Price: Rs 730

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n     TechM reported in line rev at US$290 mn (+4.1% QoQ) , however margins disappointed (-180 bps decline QoQ V/s exp of flat mgns). Profit beat driven by higher other income

n     Revenues from BT flat at GBP 71 mn (non top/top 10 client rev up 6/8% QoQ). Mgmt sees risks to the GBP 70-72mn/qtr rev outlook from BT with client going for a rebid process

n     Standalone FY12/13E EPS cut by ~6/4%, adj. consolidated EPS while FY13E EPS marked down by 1/3.5% to Rs58.3/66.2

n     See pause to recent outperformance as weak macro, top client headwinds pose downside risks despite inexpensive valuations. Downgrade to HOLD with unchanged TP of Rs 730