Prabhudas Lilladher has given Buy recommendation for Tech Mahindra with a target price of Rs. 1132 in its research report issued on Apr 27, 2021

Prabhudas Lilladher’s research report on Tech Mahindra

TechM reported modest revenue growth of 1.6% QoQ USD, ~70bps below our and street estimates. Growth was soft in both Communications (+1.4% QoQ USD) and Enterprise (+1.8% QoQ USD) segment. Delay in deal closures and lower-than-expected kicker from Comviva led to revenue miss. Net new deal win TCV was strong this quarter at $1.04 Bn +129% QoQ and 103% YoY. But for the full year FY21, net new TCV declined by 40% to $2.2 Bn due to weak deal wins in first three quarters. Management mentioned that deal pipeline is robust and they expect this deal win momentum to continue in 1QFY22 led by strong traction in 5G and cloud.

Outlook

Announced dividend of Rs45 per share for FY21 translating into a payout ratio of 88% on net profit and 55.4% on FCF. TM is currently trading at 15.4X/14.5X at EPS of INR 62.7/66.6 on FY22/23E respectively, inexpensive. Maintain Buy.

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