Tech Mahindra Revenues And EBIT Beats Estimates In Apr-Jun ’21 Quarter Results

 Actual vs. expectations

Revenues and EBITM both were ahead of our and consensus estimates.

Likely stock reaction

Positive

Key positives – Broad based growth, strong deal intake (USD815mn), EBITM beat.

Result Summary

·         TechM reported revenues of USD1.38bn, up 4.1%/14.6% QoQ/YoY (CC 3.9%/10.8% QoQ/YoY), ahead of our expectations of USD1.36bn. Revenues from Communications and Enterprise segments grew 2.9% QoQ CC and 4.5% QoQ CC respectively.

·         EBITM fell 80bps sequentially to 15.2% and came 120bps ahead of our expectations on account of lower depreciation and SG&A costs.

·         Adj. Profits at Rs13.85bn (25.1% QoQ, 39.2% YoY) was 18% ahead of our estimates on account of revenue and EBIT beat, higher other income and lower taxes.

·         Net new deal intake was robust at USD815mn (Communications – USD352mn and Enterprise – USD 463mn).

Relative performance compared to Tier-1 cos in Jun’21:

·         Revenue growth - TCS US$ 6.15bn, 2.4% CC QoQ; Infosys US$3.78bn, 4.8% CC QoQ; Wipro US$2.4bn, 12% QoQ CC (organic 4.9%); HCLT US$2.72bn, 0.7% QoQ CC.

·         EBITM - TCS Adj. EBITM fell 130bps QoQ to 25.5%; Infosys Adj EBITM declined 80bps QoQ to 23.7%, Wipro IT services EBITM declined 320bps QoQ to 17.8%; HCLT adjusted EBITM declined 80bps QoQ to 19.6%.

Growth by Verticals

·         Telecom: 12.6%YoY ( V/s -0.2% YoY in Mar’21 quarter)

·         Manufacturing: 12.2%YoY ( V/s -5.2% YoY in Mar’21 quarter)

·         Retail, transport & logisitcs:  16.4%YoY  ( V/s 6.2% YoY in Mar’21 quarter)

·         Technology, media & entertainment: 22.7% YoY( V/s 27.8% YoY in Mar’21 quarter)

·         Banking, financial services & insurance: 19.7% YoY (V/s 10.3% YoY in Mar’21 quarter)

·         Others: 11.1% YoY (V/s -3.4% YoY in Mar’21 quarter)

Growth by Geographies

·         US: 8.4%YoY ( V/s -2.1% YoY in Mar’21 quarter)

·         Europe: 20.5%YoY ( V/s 2.7% YoY in Mar’21 quarter)

·         ROW: 20.7% YoY( V/s 11.5% YoY in Mar’21 quarter)

Manpower details

Total Headcount: 126,263 up 4.3% QoQ

LTM Attrition: 17%, V/s 13% in Mar’21 quarter and 12% in Dec’20 quarter.