Result Update

February 4, 2016
Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Tech Mahindra (TECMAH)

Buy
| 600
12 months
28%

Lacklustre

Whats changed?
Target
EPS FY16E
EPS FY17E
Rating

Unchanged
Changed from | 29 to | 30
Changed from | 36 to | 37
Unchanged

Quarterly performance
Revenue
EBITDA
EBITDA (%)
PAT

Q3FY16
6,701
1,136
16.9
759

Q3FY15 YoY (%)

5,752
16.5
1,160
(2.1)
20.2 -322 bps
805
(5.7)

Q2FY16
6,616
1,101
16.6
786

QoQ (%)
1.3
3.2
27 bps
(3.4)

Key financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY14
18,831
4,184
3,029
31.8

FY15
22,621
4,153
2,628
26.7

FY16E
26,455
4,273
2,879
30.0

FY17E
30,802
5,229
3,553
37.0

FY15
17.6
22.4
10.5
3.8
21.5
26.9

FY16E
15.7
20.0
10.0
3.1
20.1
25.5

FY17E
12.7
16.2
7.9
2.7
20.9
27.1

Valuation summary
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

FY14
14.8
18.8
10.2
4.9
29.2
37.1

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (Dec-15) (| Crore)
Cash and Investments (Dec-15) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value

Amount
45,224.8
888.1
4,940.2
41,172.7
737 / 459
96.2
| 10

Price performance
TechMahindra
MindTree
KPIT Tech
NIIT Tech

| 472

1M

3M

6M

12M

9.6
(2.5)
17.1
21.1

(15.1)
1.8
(11.9)
31.5

(24.7)
(5.5)
(50.2)
29.2

(0.7)
37.9
(38.5)
25.1

Research Analysts
Abhishek Shindadkar
abhishek.shindadkar@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Tech Mahindra (TechM) reported its Q3FY16 earnings, which were

generally in line with our estimates
US$ revenues grew 0.4% QoQ to $1,015 million in line with our 0.7%
growth and $1,018 million estimate
Constant currency revenues grew 1.2% QoQ
Rupee revenues grew 1.3% QoQ to | 6,701 crore, also in line with
our 1.4% QoQ growth and | 6,705 crore estimate
PAT of | 759 crore was below our | 790 crore estimate led by higher
interest expense and lower other income relative to estimates
In-line but could have been better
TechM reported in-line Q3 earnings with 0.4% dollar revenue growth and
1.2% in CC. Growth was led by manufacturing (17.1% of revenues, 2.8%
QoQ growth in dollar terms), BFSI (9.8%, 2.5%), retail (6.8%, 13.7%) and
enterprise business, which grew 4.4% QoQ in CC terms but was offset by
telecom weakness (51.3%, declined 2.7%; 1.8% in CC) that itself was
driven by weakness in top clients. Top 5 customer revenues declined
12.2% QoQ. TechM had commented earlier that the enterprise business
could grow in line with industry average, led by improving large deal
funnel and win rates in BFSI, manufacturing and other verticals while
communication vertical growth, though challenged, could see an uptick
from Q4FY16E onwards. TechM signed a deal worth $275 million in total
contract value (TCV) in Q3 leading to LTM TCV of $1,150 million.
Noticeably, 9MFY16 TCV of $975 million (vs. $740 million in 9MFY15) is
higher than that in entire FY15.
Top 5 client metric deteriorates led by top client
Top 5 customer revenues declined 12.2% QoQ vs. 0.9% decline in Q2
while top 10 customers revenues declined 6.6% QoQ (vs. 0.1%, 1.7%,
2.2%, 1.3% QoQ decline in Q2, Q1FY16, Q4 and Q3FY15, respectively) as
growth in top 6-10 (9.5%) was offset by weakness in top 5. Top 11-20
customer revenues declined 7.4% QoQ vs. 2.2%, 8.9%, 6.5%, 2.7%, 5.2%
growth in Q2, Q1FY16, Q4, Q3 and Q2FY15, respectively).
Margin trajectory may rise in FY17E
At 16.9%, EBITDA margins improved 27 bps QoQ in line with our 17%
and 40 bps improvement estimate led by SG&A rationalisation. SG&A as a
percentage of revenue declined 110 bps QoQ to 14.3% vs. 15.4% in Q2.
Q4 margins could be impacted by 150-200 bps due to wage hikes
(Q4FY15 margins were impacted 200 bps due to average 7% offshore and
2% onshore wage hikes) but could be offset by seasonality in Comviva
(strong Q4) and operational efficiency. Recall, the management had
commented earlier that the margin trajectory could improve in H2CY16E
helped by traditional margin levers (utilisation, offshoring), seasonally
strong Q4 for Comviva and change in business mix (product, regions and
client portfolio management).
Recovery continues; reiterate BUY on inexpensive valuations
We expect TechM to report rupee revenue, PAT CAGR of 17%, 16% in
FY15-17E (average 16.6% EBITDA margins in FY16-17E), vs. 37%, 30%
reported in FY10-15 (average 20.6%), respectively, driven by enterprise
business, acquisitions, order bookings and large deal ramp-ups. We value
TechM at 16.2x its FY17E EPS of | 37 to arrive at our target price of | 600.
We maintain our BUY recommendation.

Variance analysis
Q3FY16 Q3FY16E Q3FY15 YoY (%) Q2FY16 QoQ (%)
6,701.1 6,705.0 5,751.7
16.5 6,615.5
1.3
4,606.6 4,539.3 3,765.6
22.3 4,495.7
2.5

Revenue
Employee expenses
Gross Margin
Gross margin (%)
SG&A expenses

2,094.5
31.3
958.7

2,165.7
32.3
1,025.9

1,986.1
5.5
34.5 -327 bps
826.0
16.1

2,119.8
32.0
1,018.8

EBITDA
EBITDA Margin (%)
Depreciation & amortisation
EBIT
EBIT Margin (%)
Other income (less interest)
PBT
Tax paid

1,135.8
16.9
173.6
962.2
14.4
39.5
1,001.7
232.7

1,139.8
17.0
201.1
938.7
14.0
124.0
1,062.6
265.7

1,160.1
-2.1
20.2 -322 bps
144.1
20.5
1,016.0
-5.3
17.7 -331 bps
15.1
161.6
1,031.1
-2.9
251.2
-7.4

1,101.0
3.2
16.6 27 bps
197.4
-12.1
903.6
6.5
13.7 70 bps
148.5
NM
1,052.1
-4.8
260.5
-10.7

759.2

790.0

PAT

805.3

-5.7

Comments
Revenue growth was led by enterprise, partially offset by telecom

-1.2
-79 bps
-5.9

785.5

-3.4

98,009
9.3 105,235
19.0 100 bps
20.0
74.0 300 bps
77.0
62.2
6.2
65.4

1.8
0 bps
0 bps
1.0

EBITDA margin improvement led by SG&A rationalisation

PAT was marginally below estimates led by higher interest expense and
lower other income relative to estimates

Key Metrics
Closing employees
107,137 106,000
IT attrition (%)
20.0
20.0
Utilisation incl trainees (%)
77.0
76.5
Average $/|
66.0
65.9
Source: Company, ICICIdirect.com Research

Software headcount increased by 235 while overall increased by 1902 QoQ

Attrition continues to be at elevated levels
Utilisation was flat QoQ

Change in estimates
(| Crore)

Old

FY16E
New % Change

Revenue
26,226
26,455
EBITDA
4,183
4,273
EBITDA Margin (%)
16.0
16.2
PAT
2,786
2,879
EPS (|)
29.0
30.0
Source: Company, ICICIdirect.com Research

0.9
2.2
20 bps
3.3
3.3

Old
29,635
5,030
17.0
3,455
36.0

FY17E
New % Change
30,802
5,229
17.0
3,553
37.0

3.9
4.0
0 bps
2.8
2.8

Comments
FY16E revenue growth could be led by enterprise business while acquisitions could
drive growth in telecom business
Growth, traditional levers could help raise margins in FY17E
EPS adjusted for change in rupee assumption

Assumptions
FY14
Closing employees
89,441
IT attrition (%)
16.5
Utilisation incl trainees (%)
75.0
Average $/|
60.7
Source: Company, ICICIdirect.com Research

FY15E
103,281
18.0
75.8
61.4

Current
FY16E
FY17E
103,658
110,999
19.0
18.0
75.3
79.0
65.0
66.0

ICICI Securities Ltd | Retail Equity Research

Earlier
FY16E
FY17E
103,658
110,999
18.0
19.0
79.0
75.3
63.5
63.5

Comments

Attrition continues to rise above comfort

Utilisation could be a key margin lever

Page 2

Company Analysis
In line but could have been better
TechM reported in line Q3 earnings with 0.4% dollar revenue growth and
1.2% in CC. Growth was led by manufacturing (17.1% of revenues, grew
2.8% QoQ growth in dollar terms), BFSI (9.8%, 2.5%), retail (6.8%, 13.7%)
and enterprise business, which grew 4.4% QoQ in CC terms but was
offset by telecom weakness (51.3%, declined 2.7%; 1.8% in CC) that was
itself driven by weakness in top clients. Top 5 customer revenues
declined 12.2% QoQ. TechM had commented earlier that enterprise
business could grow in line with industry average, led by improving large
deal funnel and win rates in BFSI, manufacturing, and other verticals while
communication vertical growth, though challenged, could see an uptick
from Q4FY16E onwards. TechM signed deal worth $275 million in total
contract value (TCV) in Q3 leading to LTM TCV of $1,150 million.
Noticeably, 9MFY16 TCV of $975 million (vs. $740 million in 9MFY15) is
higher than entire of FY15.
Exhibit 1: Dollar revenue may grow at 12.5% CAGR in FY15-17E
5500

4667
15.4

3098
9.2 17.7 18.1

3500
2500
1500

4070

3686
19.0

18.7 16.9

19.3

14.7 20
15.7

2.6

-0.8
1263
977 1127 1156

30

12.3 9.8

$ million

4500

10

10.4

989 1011 1015

855 900 924 984

40

-10

Dollar revenue

FY17E

FY16E

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

500

Growth, YoY

Source: Company, ICICIdirect.com Research

Exhibit 2: TechM growth vs. Nasscom guidance FY16E growth primarily driven by acquisitions
40
30
18.7
15.4

16.0

16.5
9.210.2

20
10

5.4

5.5

17.7
13.0

19.0
13.0

10.4

13

2.6

0
-0.8
-10
FY09

FY10

FY11
Growth, YoY

FY12

FY13

FY14

FY15

FY16E

NASSCOM guidance

Source: Company, ICICIdirect.com Research

Margin trajectory could rise in FY17E

At 16.9%, EBITDA margins improved 27 bps QoQ in line with our 17%
and 40 bps improvement estimate led by SG&A rationalisation. SG&A as a
percentage of revenue declined 110 bps QoQ to 14.3% vs. 15.4% in Q2.
Q4 margins could be impacted by 150-200 bps due to wage hikes
(Q4FY15 margins were impacted 200 bps due to average 7% offshore and

ICICI Securities Ltd | Retail Equity Research

Page 3

2% onshore wage hikes) but could be offset by seasonality in Comviva

(strong Q4) and operational efficiency. As a reminder, Q4FY15 margins
had declined 500 bps QoQ and were significantly lower than FY15
average of 18.4% led by wage hikes, acquisitions integration, cross
currency headwinds and SG&A expenses. Finally, the management had
commented earlier that the margin trajectory could improve in H2CY16E
helped by traditional margin levers (utilisation, offshoring), seasonally
strong Q4 for Comviva and change in business mix (product, regions and
client portfolio management).
Exhibit 3: EBITDA margins may decline 220 bps in FY16E
25

24.5

22

21.4

20.5

19

22.2
20.0 20.2

16.8

18.4

18.1
15.2

16

18.4
15.2

15.0

16.2

17.0

13

FY17E

FY16E

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

10

EBITDA margin

Source: Company, ICICIdirect.com Research

Exhibit 4: Utilisation flat QoQ after improving 300 bps sequentially in Q2

79.0

80
77
74.0

74
71

75.8

75.0 75.0
73.0

77.0 77.0

72.0

73.0

74.0

75.3

74.0
71.0

70.0

68

FY17E

FY16E

Q3

Q2

Q1

FY15

Q4

Q3

Q2

Q1

FY14

FY13

FY12

FY11

FY10

65

Utilisation incl trainees

Source: Company, ICICIdirect.com Research

Growth led by RoW with US, Europe weak

Growth across geographies was led by RoW while both the US and
Europe were weak. RoW revenues grew 6.3% QoQ while the US declined
1.9% QoQ vs. 4.8% growth in Q2 on top of 5.6% in Q1) while Europe was
uneven as revenues declined 1% QoQ vs. 1.9% growth in Q2 and 0.8%
decline in Q1.
Top 5 client metric deteriorates led by top client
Top 5 customer revenues declined 12.2% QoQ vs. 0.9% decline in Q2
while top 10 customers revenues declined 6.6% QoQ (vs. 0.1%, 1.7%,
2.2%, 1.3% QoQ decline in Q2, Q1FY16, Q4 and Q3FY15, respectively) as
growth in top 6-10 (9.5%) was offset by weakness in top 5. Top 11-20
customer revenues declined 7.4% QoQ vs. 2.2%, 8.9%, 6.5%, 2.7%, 5.2%
growth in Q2, Q1FY16, Q4, Q3 and Q2FY15, respectively).

ICICI Securities Ltd | Retail Equity Research

Page 4

Healthy client additions sequentially

During the quarter, active clients rose by 13 to 801. Across categories,
clients contributing >$50 million in LTM revenues were flat QoQ, $20-50
million increased by 1, $10-20 million was flat QoQ while $5-10 million
increased by two. Client contributing >$1 million increased by 25. Client
mining was okay as revenue/client declined 1.3% QoQ to $1.27 million vs.
$1.28 million in Q2 and $1.29 million in Q1 and continues to be lower
compared to $1.37 million average during 9MFY15 (before LCC and
SOFGEN acquisitions). As a reminder, during FY15, the active customer
base rose by 138 including 87 from LCC and SOFGEN while >$1 million
revenue run-rate customers increased by 52, >$5 million by 21, >$10
million by four, >$20 million by eight and >$50 million by two,
respectively.
Exhibit 5: TechM adds 25 clients to $1 million+ category in Q3FY16
350
280

239

242

245

254

FY14

Q1

Q2

Q3

291

291

296

298

Q4

FY15

Q1

Q2

326

210
140
70

44

55

60

59

FY10

FY11

FY12

FY13

$1 million+ clients

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 5

Q3

Outlook and valuation

Tech Mahindra (TechM) reported its Q3FY16 earnings, which were
generally in line with our estimates. Growth was led by the enterprise
business partially offset by weakness in the top telecom customer.
Growth was led by RoW across geographies while the US, Europe were
soft. TechM highlighted that deal large funnel and win rates in BFSI,
manufacturing, and other verticals are improving and could lead to broad
based growth while communication could be volatile. Deal signings were
healthy as TechM signed deal worth $275 million in total contract value
(TCV) in Q3 leading to LTM TCV of $1,150 million. Noticeably, 9MFY16
TCV of $975 million (vs. $740 million in 9MFY15) is higher than that in
entire FY15.
We expect TechM to report rupee revenue, PAT CAGR of 17%, 16% in
FY15-17E (average 16.6% EBITDA margins in FY16-17E), vs. 37%, 30%
reported in FY10-15 (average 20.6%), respectively, driven by enterprise
business, acquisitions, order bookings and large deal ramp-ups. We value
TechM at 16.2x its FY17E EPS of | 37 to arrive at our | 600 target price.
We maintain our BUY recommendation.
Exhibit 6: One year forward rolling PE
850
680
510
340
170

Price

Dec-15

Apr-15

Aug-15

Dec-14

Apr-14

Aug-14

Dec-13

Apr-13

12

Aug-13

Dec-12

Apr-12

16

Aug-12

Dec-11

Apr-11

20

Aug-11

Dec-10

Apr-10

Aug-10

Dec-09

Apr-09

Aug-09

Dec-08

Apr-08

Aug-08

Source: Company, ICICIdirect.com Research

Exhibit 7: Valuations

FY14
FY15
FY16E
FY17E

Sales
(| cr)
18,831
22,621
26,455
30,802

Growth
(%)
31.4
20.1
16.9
16.4

EPS
(|)
31.8
26.7
30.0
37.0

Growth
(%)
41.5
(16.0)
12.1
23.4

PE
(x)
14.8
17.6
15.7
12.7

EV/EBITDA
(x)
10.2
10.5
10.0
7.9

RoNW
(%)
29.2
21.5
20.1
20.9

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 6

RoCE
(%)
37.1
26.9
25.5
27.1

Company snapshot
900
800

Target price : | 600

700
600
500
400
300
200
100
Jan-17

Sep-16

Nov-16

Jul-16

Mar-16

May-16

Jan-16

Nov-15

Jul-15

Sep-15

May-15

Jan-15

Mar-15

Nov-14

Jul-14

Sep-14

Mar-14

May-14

Jan-14

Sep-13

Nov-13

Jul-13

May-13

Jan-13

Mar-13

Nov-12

Jul-12

Sep-12

May-12

Jan-12

Mar-12

Sep-11

Nov-11

Jul-11

Mar-11

May-11

Jan-11

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
Mar-12

Event
Buys Satyam in a stock deal that values the company at $1.8 billion. This would reduce dependency on BT, from 35% to 19% of total revenues

Aug-12

BT group sells 14.1% stake in TechM at average | 778 per share to raise $ 250 million

Sep-12

Acquires 51% stake in Comviva Technologies, a mobile value-added services player, for | 260 crore

Dec-12
Jun-13

BT group sells its 9.1% stake in Tech Mahindra for at least $ 183 million, for a minimum price of | 855 per share
Andhra court approves merger of Tech Mahindra and Mahindra Satyam. The merger concludes formally on July 8, 2013

Nov-13

Announces acquisition of Mahindra Engineering Services in a share swap deal. MES is an engineering company focused on automotive vertical

Oct-14

Reports robust Q2FY15 performance as dollar revenues grow 5.2% QoQ led by communications while margins expand 180 bps QoQ to 20%

Dec-14

Acquires US-based Lightbridge Communications for $240 million. The company generated $430 million revenues with 8% EBITDA margins during CY14

Jan-15
Acquires Geneva based SOFGEN holdings, a consulting company with presence in private wealth, commercial and retail banking solutions, for $30 million
May-15
Reports disappointing Q4FY15 results as organic revenues declined sequentially led by weakness in telecom while margins declined 500 bps QoQ
Jul-15
Reports generally better Q1FY16 earnings as US$ revenues grew 0.5% QoQ to $989 million vs. our $974.4 million estimate
Nov-15
Reports encouraging set of Q2FY16 earnings with both revenue and margins ahead of our estimates. Constant currency revenues grew 3% QoQ
Source: Company, ICICIdirect.com Research

Top 10 Shareholders
Rank
1
2
3
4
5
6
7
8
9
10

Name
Mahindra Group
TML Benefit Trust
Capital World Investors
Capital International, Inc.
Life Insurance Corporation of India
Stewart Investors
ICICI Prudential Asset Management Co. Ltd.
Norges Bank Investment Management (NBIM)
The Vanguard Group, Inc.
First State Investments (Singapore)

Shareholding Pattern
Latest Filing Date % O/S Position (m) Change (m)
30-Sep-15 26.49
256.2
0.0
30-Sep-15 9.93
96.0
0.0
31-Dec-15 7.87
76.1
6.6
30-Sep-15 5.96
57.6
-3.5
30-Sep-15 3.67
35.5
35.5
30-Sep-15 2.57
24.9
-4.4
30-Sep-15 2.42
23.4
-27.2
30-Sep-15 1.56
15.1
1.7
31-Dec-15 1.32
12.8
0.0
30-Nov-15 1.28
12.4
-1.2

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

35.99 36.74 36.71 36.68 36.65
39.63 38.11 37.49 34.23 37.03
10.64 11.42 10.41 13.92 12.05
13.74 13.73 15.39 15.17 14.27

Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys
Investor name
Life Insurance Corporation of India
Capital Research Global Investors
Capital World Investors
Nayyar (Vineet)
Norges Bank Investment Management (NBIM)
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Value
301.78m
81.85m
51.70m
26.38m
14.13m

Shares
35.47m
9.62m
6.56m
3.20m
1.66m

Sells
Investor name
ICICI Prudential Asset Management Co. Ltd.
Stewart Investors
Investec Asset Management Ltd.
Capital International, Inc.
Franklin Advisers, Inc.

Value
-231.14m
-37.23m
-33.03m
-29.53m
-16.87m

Shares
-27.17m
-4.38m
-3.88m
-3.47m
-1.98m

Page 7

Financial summary
Profit and loss statement

| Crore

Cash flow statement

| Crore

FY14

FY15

FY16E

FY17E

(Year-end March)

FY14

FY15

FY16E

FY17E

18,831

22,621

26,455

30,802

Profit before Tax

3,695

3,618

3,903

4,862

31

20

17

16

522

611

741

832

11,700

15,158

18,213

20,983

(2,044)

(852)

(1,787)

(1,985)

Gross profit

7,131

7,464

8,242

9,818

Inc/(dec) in CL and Provisions

428

637

1,100

S,G&A expenses

2,948

3,311

3,968

4,589

Taxes paid

(1,094)

(1,073)

(983)

(1,264)

14,648

18,468

22,182

25,572

CF from operating activities

1,593

2,409

2,140

3,080

4,184

4,153

4,273

5,229

(Inc)/dec in Investments

(99)

(1,716)

Growth (%)

37

(1)

22

(Inc)/dec in Fixed Assets

(914)

(1,113)

(1,000)

(1,000)

Depreciation

522

611

741

832

Others

248

217

440

525

80

30

70

60

CF from investing activities

(190)

(2,092)

(560)

(475)

Issue/(Buy back) of Equity

Total operating Income

Growth (%)
COGS (employee expenses)

Total Operating Expenditure

EBITDA

Interest
Other Income

Add: Depreciation
(Inc)/dec in Current Assets

113

107

440

525

50

58

3,695

3,618

3,903

4,862

Inc/(dec) in loan funds

(789)

(235)

(100)

(100)

Total Tax

752

959

983

1,264

Dividend paid & dividend tax

(136)

(550)

(788)

(900)

Exceptional item

347

3,029

2,628

2,879

3,553

(97)

(64)

(70)

(60)

PBT

PAT
Growth (%)
EPS (|)

55

(13)

10

23

31.8

26.7

30.0

37.0

Source: Company, ICICIdirect.com Research

Inc/(dec) in debentures
Finance charges
CF from financing activities

(972)

(790)

(958)

(1,060)

Net Cash flow

431

(473)

622

1,545

Cash by acquistion

480

227

(461)

1,452

2,405

3,027

3,320

2,405

3,027

4,572

FY14

FY15

FY16E

FY17E
37.0

Opening Cash
Cash carried to B/S

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March)

| Crore
FY14

FY15

FY16E

Key ratios

FY17E

(Year-end March)
Per share data (|)

Liabilities
234

480

961

961

EPS

31.8

26.7

30.0

Reserve and Surplus

8,947

11,768

13,379

16,032

Cash EPS

37.3

33.0

37.7

45.7

Total Shareholders funds

9,182

12,249

14,340

16,993

BV

96.6

124.6

149.3

176.9

Minority Interest

144

160

200

245

Debt - long term

19

46

46

46

Equity Capital

Other long term liabilities

Total Liabilities

790

454

454

454

11,365

14,140

16,271

18,969

Assets

DPS

5.0

6.0

7.0

8.0

34.9

24.5

31.5

47.6

EBITDA Margin

22.2

18.4

16.2

17.0

PBT Margin

19.6

16.0

14.8

15.8

Cash Per Share

Operating Ratios (%)

2,030

2,305

2,564

2,732

PAT Margin

14.2

11.6

10.9

11.5

Capital WIP

266

568

568

568

Debtor days

84

84

84

84

Investments

265

896

896

896

Creditor days

29

33

30

32

Deferred tax assets

383

390

390

390

Return Ratios (%)

Net Block

Goodwill on consolidation

564

1,728

1,728

1,728

RoE

29.2

21.5

20.1

20.9

Debtors

4,349

5,206

6,088

7,088

RoCE

37.1

26.9

25.5

27.1

Loans and Advances (short)

1,454

1,873

2,190

2,550

RoIC

61.9

43.5

36.8

40.8

914

1,276

1,534

1,786

Valuation Ratios (x)

Cash

3,320

2,405

3,027

4,572

EV / EBITDA

10.2

10.5

10.0

7.9

Other current assets

2,626

3,838

4,484

5,217

EV / Net Sales

2.3

1.9

1.6

1.3

Loans and Advances (long)

Short term borrowings

33

629

529

429

Market Cap / Sales

2.5

2.0

1.7

1.5

Trade payables

1,472

2,059

2,184

2,704

Price to Book Value

4.9

3.8

3.1

2.7

Current liabilities

1,802

1,223

1,430

1,665

Solvency Ratios

Provisions

1,267

1,799

2,104

2,449

Debt/EBITDA

0.0

0.2

0.1

0.1

Net Current Assets

5,972

6,544

8,157

10,435

Debt / Equity

0.0

0.1

0.0

0.0

Application of Funds

11,365

14,140

16,271

18,969

Current Ratio

1.9

2.1

2.2

2.2

Quick Ratio

1.9

2.1

2.2

2.2

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Source: Company, ICICIdirect.com Research

Page 8

ICICIdirect.com coverage universe (IT)

CMP
M Cap
(|)
TP(|) Rating
(| Cr) FY15
Sector / Company
412 470 Hold
4,637 31.4
Cyient (INFENT)
1,333 1,200
Sell
5,428 74.3
Eclerx (ECLSER)
34
42
Buy
2,271
3.3
Firstsource (FIRSOU)
852 1,000
Buy 120,088 51.4
HCL Tech* (HCLTEC)
1,158 1,350
Buy 265,917 53.9
Infosys (INFTEC)
137 135 Hold
2,713 11.9
KPIT Tech (KPISYS)
1,495 1,470 Hold 12,543 63.9
Mindtree (MINCON)
539 525 Hold
3,300 31.8
NIIT Technologies (NIITEC)
657 675 Hold
5,259 36.3
Persistent (PSYS)
2,416 2,600
Buy 476,115 110.8
TCS (TCS)
472 600
Buy 45,672 26.7
Tech Mahindra (TECMAH)
558 680
Buy 137,804 35.1
Wipro (WIPRO)
* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

EPS (|)
FY16E FY17E
32.8 39.0
105.0 115.0
3.8
4.6
55.0 63.0
58.5 67.0
12.5 14.0
73.8 89.0
45.5 50.0
38.5 47.0
122.0 130.0
30.0 37.0
36.0 40.5

P/E (x)
FY15 FY16E FY17E
13.1 12.6 10.6
17.9 12.7 11.6
10.1
8.8
7.3
16.6 15.5 13.5
21.5 19.8 17.3
11.6 11.0
9.8
23.4 20.3 16.8
17.0 11.9 10.8
18.1 17.1 14.0
21.8 19.8 18.6
17.7 15.8 12.8
15.9 15.5 13.8

EV/EBITDA (x)
FY15 FY16E FY17E
10.9
9.2
7.0
16.9 12.3 10.6
8.5
7.4
5.6
12.2 11.0
9.2
15.2 13.4 11.2
8.6
6.7
5.8
15.9 13.2 10.3
8.1
5.7
4.7
10.9
9.3
7.1
15.7 13.7 12.3
10.5 10.0
7.9
11.2 10.3
8.8

RoCE (%)
FY15 FY16E FY17E
22.2 21.3 22.0
40.4 47.6 43.7
9.5 10.8 13.8
35.2 31.4 30.0
31.4 30.2 30.8
14.7 17.4 17.4
33.7 32.5 32.5
23.4 31.7 33.3
27.5 25.4 26.4
81.8 79.0 74.5
26.9 25.5 27.1
23.0 22.1 22.5

RoE (%)
FY15 FY16E FY17E
19.2 17.7 18.4
32.1 36.9 33.6
11.2 11.3 12.1
29.3 25.7 24.4
22.5 21.8 22.2
16.9 15.4 14.9
26.6 25.6 25.6
14.3 17.8 17.1
20.7 18.8 19.4
42.8 36.9 31.8
21.5 20.1 20.9
21.2 19.2 19.2

Page 9

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 10

ANALYST CERTIFICATION
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the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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ICICI Securities Ltd | Retail Equity Research

Page 11