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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
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U n c e r t a i n t y p e r s i s t s …
Tech Mahindra (TML) reported Q3FY12 revenues of | 1,445 crore vs. our
| 1,482 crore estimate led by growth in non-BT revenues. Gross margins
declined 20 bps QoQ to 31.8% vs. 32% in Q2FY12 despite ~11% interquarter depreciation of the Indian rupee. EBITDA margins at 16.2% were
marginally above our modest 15.8% estimate, an increase of 93 bps QoQ
led by the depreciating rupee. Volume growth continues to be tepid at
~(0.5)% while cross currency impacted revenues by -2%. Dollar revenues
declined 2.5% QoQ while rupee revenues grew 8.4% QoQ led by rupee
depreciation. BT contribution declined 2 percentage points (pp) to 35% of
Q3 revenues. Further, management commentary continues to suggest
that BT revenues could be under pressure this fiscal. Impending merger
with Mahindra Satyam remains the only trigger for the stock. We maintain
our HOLD recommendation.
ƒ Operating metric highlights
BT revenues declined 7.8% QoQ to $101 million while non-BT
revenues grew 0.6% sequentially. Top 5 excluding top 1 client were
flat at 0.6% QoQ growth, while top 6-10 clients have declined 2.5%
QoQ. Geographically, the US contribution was flat at 33% while the
rest of the world increased by 2 pp to 22% (20% in Q2). Utilisation
levels increased to 73% from 72% and the total headcount declined
by 911. Software professionals declined by 1447 (1255 in Q2FY12), a
second sequential quarter of decline in s/w professionals. Active
clients increased by two to 130 vs. 128 in Q2. BPO revenues
increased 12% QoQ to | 138.9 crore from | 124 crore in Q2FY12.
EBITDA and EBIT margins improved 93 bps and 204 bps QoQ,
respectively.
V a l u a t i o n
We have valued the stock at 4.5x our FY13E EPS estimate of | 80.5 plus
value of the holding in Mahindra Satyam. The rationale for the lower P/E
multiple includes uncertainty surrounding BT revenue growth and pricing.
We continue to apply a 15% holding discount for Mahindra Satyam
considering the company has settled a majority of its lawsuits and that
restructuring has shown fruitful results.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PDF LINK for report- click HERE
U n c e r t a i n t y p e r s i s t s …
Tech Mahindra (TML) reported Q3FY12 revenues of | 1,445 crore vs. our
| 1,482 crore estimate led by growth in non-BT revenues. Gross margins
declined 20 bps QoQ to 31.8% vs. 32% in Q2FY12 despite ~11% interquarter depreciation of the Indian rupee. EBITDA margins at 16.2% were
marginally above our modest 15.8% estimate, an increase of 93 bps QoQ
led by the depreciating rupee. Volume growth continues to be tepid at
~(0.5)% while cross currency impacted revenues by -2%. Dollar revenues
declined 2.5% QoQ while rupee revenues grew 8.4% QoQ led by rupee
depreciation. BT contribution declined 2 percentage points (pp) to 35% of
Q3 revenues. Further, management commentary continues to suggest
that BT revenues could be under pressure this fiscal. Impending merger
with Mahindra Satyam remains the only trigger for the stock. We maintain
our HOLD recommendation.
ƒ Operating metric highlights
BT revenues declined 7.8% QoQ to $101 million while non-BT
revenues grew 0.6% sequentially. Top 5 excluding top 1 client were
flat at 0.6% QoQ growth, while top 6-10 clients have declined 2.5%
QoQ. Geographically, the US contribution was flat at 33% while the
rest of the world increased by 2 pp to 22% (20% in Q2). Utilisation
levels increased to 73% from 72% and the total headcount declined
by 911. Software professionals declined by 1447 (1255 in Q2FY12), a
second sequential quarter of decline in s/w professionals. Active
clients increased by two to 130 vs. 128 in Q2. BPO revenues
increased 12% QoQ to | 138.9 crore from | 124 crore in Q2FY12.
EBITDA and EBIT margins improved 93 bps and 204 bps QoQ,
respectively.
V a l u a t i o n
We have valued the stock at 4.5x our FY13E EPS estimate of | 80.5 plus
value of the holding in Mahindra Satyam. The rationale for the lower P/E
multiple includes uncertainty surrounding BT revenue growth and pricing.
We continue to apply a 15% holding discount for Mahindra Satyam
considering the company has settled a majority of its lawsuits and that
restructuring has shown fruitful results.
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