Motilal Oswal maintains `Neutral' rating on Tech Mahindra with a target price of Rs736, based on 12x FY12E earnings. Tech Mahindra's Q2FY11 operating performance was above estimates with EBITDA at 21.7% up 290 bps Q-o-Q. Rupee revenues were marginally above estimates at Rs1,235 crore, up 8.9% Q-o-Q. Overall rupee revenues grew 8.9% Q-o-Q excluding pass-throughs due to: (i) 4.5% Q-o-Q growth in volumes, and (ii) about 4.5% impact of cross currency movements. Quarterly annualised attrition rate of 30% in Q2FY11 is a key concern. It resulted in a net decline of 1,260 in the employee count despite a healthy demand environment and hiring activity. Sustaining healthy Q2FY11 margin performance appears challenging due to:
UBS INVESTMENT on MUNDRA PORT
UBS initiates `Neutral' rating on Mundra Port. Mundra Port's Q2 revenues were 410 crore, operating profit 270 crore and PAT of 210 crore. Interest/depreciation costs were lower and other income was higher than the estimates. Also, results were impacted by a one-off item of 30 crore, pertaining to additional handling expenses on a new fertilizer-handling facility that was constructed last quarter. Adjusting for that, EBITDA margins would be 73% and PAT would be 240 crore. MPSEZ handled 12.6 mt in Q2FY11, led by container tonnage, coal and fertiliser. Volumes across categories witnessed strong growth. Crude volumes declined 28% y-o-y, due to pipeline works for the expansion project at IOC's Panipat refinery. H1FY11 volumes were up 26% y-o-y at 25.2 mt, led by coal (+52% y-o-y, 6.5mt) and container tonnage (+34% y-o-y, 7.2 mt). UBS' valuation comprises 132 for the port, 15 for the SEZ and 8 for investments.
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