Tech Mahindra Q4 Results Review - Expect FY24 Growth To Remain Muted: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Motilal Oswal Report.Tech Mahindra Ltd.’s Q4 FY23 revenue of $1.67 billion rose 0.3% QoQ in constant currency, a tad ahead of our estimates of 0.7% decline. Retail (-10% QoQ) dragged Q4 FY23 growth. Ebit margin was down 80 basis points QoQ to 11.2% (versus estimate of 11.9%). The company delivered weak total contract value of $593 million, down 25% QoQ.Weak macro environment, delayed decision making and cuts in discretionary spends hit Q4 FY23 growth. Management indicated that the situation is likely to remain so in H1 FY24 before picking up in H2 FY24E. We see muted growth (4.7% CC) for FY24E given the low deal wins, poor exit to FY23 and likely weakness in H1 FY24. With macro stabilising over H2 FY24E and pick up in 5G spends, we are factoring in FY25E U.S. dollar CC growth of 10.1%. Overall, we expect Tech Mahindra to deliver 7.8% U.S. dollar compound annual growth rate over FY23-25. On margins front, poor Q4 exit and slow growth to limit margin pick up in FY24E despite continued efforts from the company to revert closer to 14%. We see FY24E/FY25E margins at 11.7%/12.9% led by Q4 FY23 miss and continued macro pressure. This should result in FY23-25E profit after tax CAGR of 12% despite the low FY23 base (PAT decline of 8.9%). While we expect a potential for performance improvement post the leadership refresh of Tech Mahindra in June 2023, we believe this will take time given the macro headwinds and limited flexibility to invest in growth because of weak current profitability..Click on the attachment to read the full report:.Tech Mahindra Q4 Results: Profit Drops 12.5% Amid Flat Revenue, Margin Miss.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Tech Mahindra Q4 Results Review - Expect FY24 Growth To Remain Muted: Motilal Oswal

Margin improvement likely to be hit by slower growth.

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