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Unformatted text preview: iliates Exceptionals/extraordinaries Other pre-tax income/(expense) Profit before tax Income tax expense Minorities Other post-tax income/(expense) Net profit DB adjustments (including dilution) DB Net profit 1200 800 Jan 12Apr 12Jul 12Oct 12Jan 13Apr 13Jul 13Oct 13 Tata Consultancy Cash Flow (INRm) Cash flow from operations Net Capex Free cash flow Equity raised/(bought back) Dividends paid Net inc/(dec) in borrowings Other investing/financing cash flows Net cash flow Change in working capital BSE 30 (Rebased) Margin Trends 32.0 31.0 30.0 29.0 28.0 27.0 26.0 Balance Sheet (INRm) 11 12 13 14E EBITDA Margin 15E 16E EBIT Margin Growth & Profitability 42 35 30 25 20 15 10 5 0 40 38 36 34 32 11 12 13 14E 15E Sales growth (LHS) 16E Key Company Metrics ROE (RHS) Solvency 0 -10 -20 -30 -40 - 50 11 12 13 Net debt/equity (LHS) 14E 15E Cash and other liquid assets Tangible fixed assets Goodwill/intangible assets Associates/investments Other assets Total assets Interest bearing debt Other liabilities Total liabilities Shareholders' equity Minorities Total shareholders' equity Net debt 16E Sales growth (%) DB EPS growth (%) EBITDA Margin (%) EBIT Margin (%) Payout ratio (%) ROE (%) Capex/sales (%) Capex/depreciation (x) Net debt/equity (%) Net interest cover (x) Source: Company data, Deutsche Bank estimates Net interest cover (RHS) Aniruddha Bhosale +91 22 7180 4037 Page 22 aniruddha.bhosale@db.com Deutsche Bank AG/Hong Kong 7 January 2014 Software & Services Indian IT Services Rating Company Price at 6 Jan 2014 (INR) 1,817.65 Buy Tech Mahindra Ltd Price target - 12mth (INR) 2,200.00 52-week range (INR) 1,861.15 - 909.75 BSE 30 Asia India 20,851 Aniruddha Bhosale Technology Reuters Bloomberg Software & Services TEML.BO TECHM IN Ideal combination of TechM’s aggression and Satyam’s relationships Enhanced revenue visibility We believe that the merged entity has the ideal combination of TechM’s (standalone) aggression and Satyam’s relationships. In our view, a strong balance sheet and extremely competitive pricing would enable the merged entity to win market share. We expect the company to deliver an earnings CAGR of 14% over FY14–16E. Improved revenue outlook and undemanding valuations make the stock suited for a P/E rerating in our view. We reiterate Buy with a target price of INR2,200. Better customer acquisition and mining Our channel checks suggest that customers are highly impressed by active involvement of Tech Mahindra’s senor...
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