Motilal Oswal: Tech Mahindra Q1 Review - Good Quarter Execution; Optimistic Outlook
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Motilal Oswal Report
Tech Mahindra Ltd.’s resilience in revenue (-5% QoQ, constant currency), especially in Enterprise, is encouraging given the current context. Decline in communications (8.2% QoQ) was on expected lines given the overhang in network services.
The margin surprise was led by better-than-expected control on selling general and administrative costs. Understandably, net new deal wins ($290 million) were weaker than the usual run-rate.
Despite the elongated decision-making cycles, the company hinted at improving deal pipeline. Revenue and margins are expected to improve from hereon. Relatively higher client concentration and the resultant impact on pricing and working capital were key concerns initially.
However, management commentary suggests these are not insurmountable. Ramp-up in recently won mega deals was largely on track, a key positive.
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