TechM Q4 profit rises 34.5% YoY; announces dividend of Rs 30 per share:

TechM Q4 profit rises 34.5% YoY; announces dividend of Rs 30 per share:

Tech Mahindra on Monday reported a 34.51 percent year-on-year (YoY) rise in consolidated net profit at Rs 1,081.4 crore for the March quarter of the financial year 2020-21 (FY21) as against Rs 803.9 crore posted in the corresponding quarter last year.

On a sequential basis, the figure was down 17.4 percent from Rs 1,309.8 crore.

The March quarter revenue stood at Rs 9,729.9 crore, up 2.5 percent YoY and 0.85 percent quarter-on-quarter (QoQ). The IT major had posted a revenue of Rs 9,490.2 crore in the same period year-ago and Rs 9,647.1 crore in the December quarter of FY21.

In dollar terms, revenue came in at $1,329.6 million, up 2.7 percent YoY while it grew 1.6 percent QoQ. The revenue growth came in at 0.7 percent in constant currency (CC) terms.

Tech Mahindra missed brokerages' profit expectations although met projections on the revenue front.

The profit after tax (PAT) during the quarter under review was expected to vault between 52-59 percent year-on-year (YoY), as per analysts. Although, the same was likely to decline on a sequential basis. Most brokerages expected the IT major to clock a 2-4 percent YoY rise in March quarter revenue (rupee terms). Meanwhile, in dollar terms, the figure was expected to grow between 3-4 percent. READ MORE

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“Our continued focus on cutting-edge technologies has expanded client engagement with large deal wins this quarter. We are witnessing a strong demand acceleration and are committed to delivering a next-level human-centered experience of the future, Now. The health and wellness of our associates and community at large, continues to be our prime focus, as we navigate through this pandemic together,” said CP Gurnani, Managing Director and Chief Executive Officer at Tech Mahindra.

Earnings before interest and tax (Ebit) during the fourth quarter rose by 68.9 percent to Rs 1,603.7 crore as against Rs 949.6 crore in the same quarter in the year-ago period. On a QoQ basis, the figure was up 4.3 percent.

Ebit margins, meanwhile, stood at 16.5 percent for the quarter ended March 2021 as against 15.9 percent in the December quarter and 10 percent in the March 2020 quarter.

TechM Q4 profit rises 34.5% YoY; announces dividend of Rs 30 per share:

The board also recommended a dividend of Rs 30 per share, including a special dividend of Rs 15 per share, for FY21, subject to approval by the members of the company. The same, if approved, will be paid by August 11, 2021, the company said.

During the quarter under review, Tech Mahindra saw an attrition rate at 13 percent in comparison to the 12 percent reported in the previous quarter of FY21.

Ahead of the results, the company's stock closed 1.3 percent higher at Rs 963 on the BSE.

The profit after tax (PAT) during the quarter under review was expected to vault between 52-59 percent year-on-year (YoY), as per analysts. Although, the same was likely to decline on a sequential basis. Most brokerages expected the IT major to clock a 2-4 percent YoY rise in March quarter revenue (rupee terms). Meanwhile, in dollar terms, the figure was expected to grow between 3-4 percent.

“Our continued focus on cutting-edge technologies has expanded client engagement with large deal wins this quarter. We are witnessing a strong demand acceleration and are committed to delivering a next-level human-centered experience of the future, Now.

TechM Q4 profit rises 34.5% YoY; The health and wellness of our associates and community at large, continues to be our prime focus, as we navigate through this pandemic together,” said CP Gurnani, Managing Director and Chief Executive Officer at Tech Mahindra.

"Tech Mahindra disappointed with a muted CC revenue growth while payout impressed with a dividend of Rs 45 per share for FY2021. Deal wins have improved with an equally strong pipeline, setting the company up for double-digit growth in FY2022. Hence, we maintain estimates," said analysts at Kotak Institutional Equities (KIE).

The stock trades at inexpensive 14X FY2023E earnings with the potential for revenue acceleration on the back of the 5G opportunity, the brokerage added while maintaining a BUY rating on the stock with a target price of Rs 1,150, valuing the stock at 16.5X FY2023E EPS.

Rishit Parikh of Nomura also finds Tech Mahindra's valuations reasonable at ~17x FY22F EPS and has a BUY call on the stock with a target of Rs 1,110. Nomura guides for a ~9.5 percent dollar revenue growth (below guidance) given it implies an aggressive ask rate of ~2.5 percent CAGR over FY22F. Meanwhile, it pegs Ebit for FY22/23 at ~15 percent/14.6 percent. Parikh, however, flags the company's inability to participate aggressively in the 5G opportunity or sustain EBIT margin levels as key downside risks to the stock.

Analysts at Phillip Capital, meanwhile, remained unimpressed with TechM's performance. It maintained a SELL rating on the stock with a target price of Rs 800.

"We maintain Tech Mahindra is precariously managing margins by measures like deferring wage hike, peak utilization, lower bench strength, and headcount reduction – which is not sustainable in the medium to long term," the brokerage said.

Phillip Capital has upgraded TechM's FY22/23 EPS estimates (by 11 per cent/6 percent), primarily on better revenue growth and margin guidance. The brokerage, however, added that it sees downside risk to its estimates, given TechM has rarely delivered growth and margins together.

Brokerage Motilal Oswal remains neutral on the stock. It has a target of Rs 1,050.

"As operations are running at elevated levels (higher utilization, lower employee expenses, etc.), we expect some normalization in EBIT margin from current levels. This should lead to the lowest PAT growth among its peer group. We largely keep our estimates unchanged post its 4QFY21 result. Our target implies 16x FY23E EPS," it said.