Range
Stop Loss
Target
Tech Mahindra (NSE Cash) - BUY
485 - 490
457
548
Daily Chart
Technical Evidences
The stock tested its long term support around
` 400 in the month of October. Post that, the
prices have rallied higher and have formed
‘Higher Top Higher Bottom’ structure on the
daily chart.
The
‘5&20
EMA’s’ on daily charts are
indicating an uptrend in the stock as the
‘5EMA is trading above the ‘20EMA’ and is
showing upside momentum.
The stock had recently consolidated in a
range and formed a ‘Pennant’ pattern. Prices
have given breakout from the mentioned
pattern.
The volumes during the upmove were high
and low during the consolidation which is a
positive sign.
Considering the above technical evidences,
we expect a healthy move in the upward
direction.
Thus, the stock can be bought from current
level to a decline up to `485 for a target of
`548 in coming three months. A stop loss
can be placed at ` 457.
Source: Falcon ( Chart time: 12:30 IST on 30/12/2016 )
December 30, 2016
Stock Info
Tech Mahindra
Growth prospects decent; Brexit - a near term concern: The Management is more optimistic
Sector
IT Software
about the Communications vertical (excluding LCC, where a lot of portfolio rationalization
has taken place). In the near term, the Management feels Brexit could cause temporary
Market cap
46,919
instability and uncertainty; however it is too early to call out any immediate business
implications. We expect a CAGR of 10.6% & 11.5% in USD and INR revenue, respectively,
over FY2016-18E.
Beta
0.9
Deal pipeline healthy: Tech Mahindra remains confident of improving revenue growth,
52 week high/low
564/405
citing healthy deal pipeline along with pick up in discretionary spending, primarily in the
US. The Management sounded confident of demand from BFSI, Healthcare, Manufacturing
and Retail. During 2QFY2017 the company won deals worth TCV of US$325mn. The
Avg. Daily Volume
30,771
pipeline has been healthy and most of the deals won are in newer areas like product
engineering, cloud, IoT and IMS.
Face Value (`)
5.0
Outlook and Valuation: Given the recent acquisitions and healthy order pipeline, the
company is expected to post a healthy US$ and INR CAGR of 10.6% and 11.5%,
respectively, over FY2016-18E. However, the acquisition of LCC will be margin dilutive in
Shareholding Pattern (%)
the near term, leading the FY2016 EBDIT margin to drop to 16.3% from 22.2% in
FY2014.Given the conducive valuation on EV/sales front, where it trades at a significant
discount to its peers, we believe the stock should witness uptrend once the profitability
Promoters
36.3
returns to its mean average. We recommend a Buy rating on the stock.
MF / Banks / Indian Fls
13.3
Company
Sales
OPM PAT EPS Adj. ROE P/E P/BV EV/EBITDA EV/Sales
(` cr)
(%)
(` cr)
(`)
(%)
(x)
(x)
(x)
(x)
FII / NRIs / OCBs
39.2
FY2017E
29,673
15.5
3,173
32.8
19.6
13.2
2.6
7.9
1.2
Indian Public / Others
11.2
FY2018E
32,937
17.0
3,886
39.9
20.7
10.9
2.2
6.1
1.0
December 30, 2016
Research Team Tel: 022 - 3935 7600
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Disclosure of Interest Statement
Tech Mahindra
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
December 30, 2016
