Tech Mahindra Q3 results miss estimates

Last updated:
Tech Mahindra Q3

Profit below estimates: IT firm Tech Mahindra reported a 2.2% increase in its net profit for the quarter ended December at Rs 1,368.5 crore as against Rs 1,338.7 crore in the last quarter. The profit is below analyst estimates of about Rs 1,454 crore. On a yearly basis, net profit rose 4.5% from Rs 1,309.80 crore in the same quarter last year. 

Revenue rises: Revenue for the October-December quarter rose 5.2% sequentially to Rs 11,450.80 crore compared to Rs 10,881.3 crore last quarter. Analysts had earlier estimated revenue of about Rs 11,413 crore. On a yearly basis, revenue rose 18.7% from Rs 9,647.10 crore in the same quarter last year. 

The growth in revenues of the company was led by the communications, retail, and manufacturing verticals. In US dollar terms, the revenue increased by 4.1% to $1,533 million. In constant currency terms, the sales growth was up 4.7% sequentially.

America contributed 48.9% of total revenues and grew by 6.6% in the quarter. Europe contributed 25.5% and increased by 2.6%, while ROW contributed 25.6% to total revenues and delivered a sequential growth of 1.2%.

Operating margins increased: The operating performance of the company strengthened during the quarter sequentially, as EBITDA increased 3.3% to Rs 2,060 crore from Rs 1,995 crore last quarter. It was lower than street estimates of Rs 2,113 crore. Net margin for the company increased by 560 bps on a sequential basis to 18%.

New deals: The company got net new deals worth $704 million compared to $750 million in the previous quarter. Tech Mahindra added 68 new clients in the Oct-Dec quarter taking the number of active clients to 1,191.

Headcount and Attrition: The headcount in the company stands at 1,45,067, increased by 3,874 quarter-on-quarter. Attrition for the quarter stood at 24%, while the utilization levels were at 84%. 

Tech Mahindra Q3 results review: 

Tech Mahindra has reported a decent set of numbers for the Oct-Dec quarter. Both the topline and bottomline were below analyst estimates. The company has witnessed strong traction across all key markets as it invested in digital capabilities. Tech Mahindra won a multi-year strategic deal with an African power generation company, to lead business & operational transformation using drone technology & automation by leveraging multiple technologies like GIS. 

The Tech Mahindra stock declined 1.3% post its Q3 results to end at Rs 1,485.

Brokerage review

Of the 51 analysts tracking the company, 44 rated a BUY, five suggested a HOLD and two recommended a SELL. The 12-month consensus price target implies an upside of 24.3%. The stock price closed at 1,4XX, down X% on Wednesday afternoon.