Goal is to reach double-digit growth in enterprise vertical in FY22: Tech Mahindra

Update on the Indian Equity Market:
On Friday, NIFTY closed in green at 11,889 (+1.0%). Top gainers in NIFTY50 were Kotak bank (+11.7%), Nestle (+5.9%), and Asian Paints (+5.7%). The top losers were HDFC (-2.1%), TCS (-2.0%), and ONGC (-1.8%). Top sectoral gainers were PVT BANK (+3.1%), BANK (+2.9%), and FIN SERVICES (+2.2%) and sectoral losers were IT (-1.1%), PSU BANK (-0.9%), and REALTY (-0.7%).

Excerpts of an interview with Mr. Manoj Bhat, CFO , Tech M with CNBC dated 26th October 2020:
• Reaching doubt-digit revenues growth would be their goal.
• They have seen bottoming out of the manufacturing, they have seen BSFI doing fairly well, and the other verticals like retail and healthcare are also doing okay so most of the components are doing well.
• Tech Mahindra’s second-quarter earnings beat estimates with the non-telecom business driving growth this time. The telecom recovery is still muted.
• In the telecom segment, the recovery in their client base is a bit slower so they do anticipate in coming one or two quarters they should start to see that normalise.
• 5G is probably something which will happen in FY22.
• Interestingly the whole ecosystem around 5G in terms of phones, in terms of devices, that is something which has seen a good amount of traction.
• A look at the deal funnel suggests it is almost at all-time high. Within that, what they are seeing is more traction in slightly smaller deals because decision-making by them has started moving at a faster pace.
• Larger ones will probably pan out in the next couple of quarters.

Consensus Estimate: (Source: market screener and investing.com websites)
• The closing price of TECHM was ₹ 828/- as of 27th October 2020. It traded at 17x/ 15x/ 13x the consensus earnings estimate of ₹ 49.2/ 56.0/ 63.6 for FY21E/22E/23E respectively.
• The consensus price target of TECHM is ₹ 942/- which trades at 15x the earnings estimate for FY23E of ₹ 63.6 /-.
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