INSUBCONTINENT EXCLUSIVE:
JM Financial has a buy call on Tech Mahindra with a target price of Rs 920.
The current market price of Tech Mahindra is Rs 690.45
Time period given by the brokerage is one year when Tech Mahindra price can reach the defined target
Investment rationale by the brokerage:The 3-4-3 strategy has taken roots: TECHM is building its growth strategy across each vertical on 3
macro trends that are shaping that vertical; 4 technology bets that TECHM would make in addressing these trends; and CXO’s priorities
among the 3 IT spend areas (Run + Change + Growth)
While the strategy was articulated six quarters back, it took 2-3 quarters to get infused in the organisation
TECHM expects it should reflect in revenue growth accelerating over 2HFY19-FY20; both the deal wins and pipeline have improved YoY and are
more aligned to the 3-4-3 strategy (share of change/growth spend-centric business is growing).
5G – warming up but revenue impact to come
with a lag: TECHM is engaged in a few pilots currently underway in various countries
It is also trying to showcase its technical competencies by setting up CoEs (centers of excellence); it announced one with Intel (in Sep-18)
TECHM is hopeful of a meaningful participation in the first phase of spend itself (software-defined networks) – LCC acquisition could be a
major differentiator – and expect the 5G spend to come as a strong wave that could be difficult to predict
Conservatively, it sees a visible revenue impact only in 2HFY20.
Margins remain in the focus: TECHM sees incremental gains from automation
