Tech Mahindra reported better-than-expected numbers for Q3FY19 on EBIT and PAT fronts. Revenue grew by 3.6% qoq to Rs8,944cr against the median consensus estimate of Rs8,956cr. Revenue in dollar terms grew by 3.5% qoq to $1,261mn. EBIT came in at Rs1,439cr, up 8.7% qoq against the median consensus estimate of Rs1,391cr. The EBIT margin expanded by 75bps qoq to 16.1%. PAT grew by 13% qoq to Rs1,203cr against median consensus estimates of Rs1,107cr.
Revenue in constant currency (cc) terms grew by 4.3% qoq.
Telecom growth was muted (+2.5% qoq), while the Enterprise business rebounded after HCI revenue decline impacted revenues in Q2FY19 (-3.4% qoq in Q2, on completion of multiple implementation projects); despite the impact of furloughs during the quarter.
Enterprise revenues grew by 4.0% qoq led by strength in key verticals: Manufacturing (+5.6% qoq) and BFSI (+2.7% qoq). Retail, transport, & logistics sustained momentum, up 6.7% qoq, possibly on strong seasonality, while Others was up 4.4% (rebound from -16.8% qoq in Q2FY19 on HCI revenue decline).
Amongst geographies, America led growth, up 4.4% qoq, RoW rose 4.8% qoq after growing by 6.3% qoq in Q2FY19 and Europe grew moderately by 1% qoq.
Growth in Top5 clients was muted (+0.4% qoq), which is likely to have impacted Telecom revenues as four of the Top5 clients are telecom clients with three being from Europe which reflects the modest growth in the European geography.
Top10 clients reported the second straight quarter of flat growth, while the overall growth was driven by clients outside of Top20 (+6.5% qoq).
Utilizations inched up by 100bps qoq to 82% aiding margins. Margins are also likely to have been aided on account of favourable currency and operational efficiencies.
DSO declined from 112 days to 107 days sequentially.
The company has added 2/1/1 clients in $10/20/50 buckets, respectively.
Tech Mahindra Ltd ended at Rs. 750, up by 0.6 points or 0.08% from its previous closing of Rs. 749.40 on the BSE.
The scrip opened at Rs. 762 and touched a high and low of Rs. 762 and Rs. 740.40 respectively. A total of 25,88,494 (NSE+BSE) shares were traded on the counter. The stock traded below its 100 DMA.
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