Tech Mahindra Q1 Results Review - Light At The End Of The Tunnel: Motilal Oswal

Motilal Oswal Report

Tech Mahindra Ltd. reported Q1 FY25 revenue of $1.5 billion, up 0.7% QoQ in constant currency versus our estimate of 0.4% QoQ CC. The weakness was primarily due to a continued slowdown in communication, media, entertainment (down 2.0% QoQ). Banking and technology were flat QoQ, while manufacturing showed continued strength with 2.4% QoQ growth.

Ebit margin was up 110 basis points QoQ at 8.5% (estimate: 7.7%). Total contract value stood at $534 million (+6.8% QoQ/+48.7% YoY). Adjusted profit after tax stood at Rs 8.5 billion (estimate: Rs 8.1 billion), up 29% QoQ, due to lower sub-con costs and selling, general and administrative costs. 

We remain positive about the restructuring at Tech Mahindra under the new leadership and believe this quarter was another step in the right direction. But we expect the impact from these steps to be visible gradually.

Further, Tech Mahindra’s presence in the communications segment, which remains under notable duress, makes the new management’s job that much harder.

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