Tech Mahin­dra Ltd

Money Times - - Market Review -

(BSE Code: 532755) (CMP: Rs.427.95) (FV: Rs.5) (TGT: Rs.500+)

Tech Mahin­dra Ltd (TECHM) is engaged in the busi­ness of com­puter pro­gram­ming, con­sul­tancy and re­lated ser­vices. Its seg­ments in­clude In­for­ma­tion Tech­nol­ogy (IT) Ser­vices and Busi­ness Pro­cess­ing Out­sourc­ing (BPO). It op­er­ates in var­i­ous sec­tors in­clud­ing the tele­com and en­ter­prise so­lu­tions busi­nesses. Its tele­com busi­ness pro­vides con­sult­ing-led in­te­grated port­fo­lio ser­vices to cus­tomers, who are tele­com equip­ment man­u­fac­tur­ers, tele­com ser­vice providers and into IT in­fra­struc­ture ser­vices; BPO; en­ter­prise ser­vices (bank­ing, fi­nan­cial ser­vices and in­sur­ance (BFSI); re­tail and lo­gis­tics; and man­u­fac­tur­ing among oth­ers of IT and IT-en­abled ser­vices de­liv­ered through a net­work of var­i­ous locations around the world. Its en­ter­prise so­lu­tions busi­ness pro­vides IT ser­vices in­clud­ing IT-en­abled ser­vices, ap­pli­ca­tion de­vel­op­ment and main­te­nance, con­sult­ing and en­ter­prise busi­ness so­lu­tions, ex­tended en­gi­neer­ing so­lu­tions and in­fra­struc­ture man­age­ment ser­vices. TECHM main­tained its rev­enue guid­ance of 2-5% for tele­com with sta­bil­ity re­turn­ing in the LCC (Light­bridge Com­mu­ni­ca­tions Cor­po­ra­tion) busi­ness as well. While the man­age­ment seemed con­fi­dent, we believe that tele­com rev­enue growth would gather pace led by capex by large tel­cos to­wards 5G and SDN/NFV (soft­ware de­fined net­works/net­work func­tion vir­tu­al­i­sa­tion). The man­age­ment ex­pects 8-10% growth from its en­ter­prise busi­ness. The merger of MSAT with TECHM has cre­ated a for­mi­da­ble player mak­ing it the fifth-largest player in the Indian IT ser­vices sec­tor (ex-Cog­nizant). This will en­able TECHM to com­pete with the big­gies of the in­dus­try and vie for larger deals, which could lead to im­proved trac­tion for the merged en­tity. Gen­er­ally, clients are more com­fort­able with larger or­ga­ni­za­tions hav­ing a good track record. The close re­la­tion­ship be­tween TECHM and MSAT since the past three years has led to bet­ter in­te­gra­tion of func­tions and both the en­ti­ties func­tion as a co­he­sive unit now. We believe our rev­enue EPS CAGR of 9.4%/10.6% over FY17-19E is achiev­able and TECHM could spring a pos­i­tive surprise. We believe that the man­age­ment’s strong fo­cus on mar­gin im­prove­ment is a step in the right di­rec­tion and will boost the con­fi­dence of in­vestors to a large ex­tent. Hence, we have a Buy on the stock with a price tar­get of Rs.500.

Tech­ni­cal Out­look: The stock looks very good on the daily chart for medium-term in­vest­ment. It has formed a cup & han­dle pattern on the daily chart and is fac­ing strong re­sis­tance of its 200 DMA at Rs.444. Start ac­cu­mu­lat­ing at this level of Rs.427.95 and on dips to Rs.402 for medium-to-long-term in­vest­ment and a pos­si­ble price tar­get of Rs.500+ in the next 6 months.

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