Tech Mahindra Q3 result preview: Revenues to decline QoQ; deal wins to be muted

economictimes.indiatimes.com:

Tech Mahindra is expected to see a sequential decline in revenue in the December quarter due to weakness in the communication vertical segment and higher furloughs. The company will report its third earnings on Wednesday, January 24.

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Revenue from operations will decline anywhere between 1-1.4% quarter-on-quarter (QoQ), while net profit is seen rising up to 44% QoQ.

Margins for the third quarter are likely to expand on a QoQ basis, due to the reshuffling of the portfolio. Analysts expect the deal wins to remain muted due to weak macro and slow decision-making.

Investors need to watch out for deal wins and pipeline from the communication vertical, pricing scenario, attrition, outlook on growth and commentary on the 5G rollout.

In the preceding second quarter, Tech Mahindra's net profit fell 62% to Rs 494 crore, while revenue from operations declined 2% year-on-year to Rs 12,864 crore.

Here's what brokerages expect from Tech Mahindra's Q3

Nuvama

Margins are likely to expand by 85 bp QoQ — still staying in the 5–6% range, on the back of various business restructuring actions. Deal wins are likely to be weak YoY, as is the overall outlook.

Jefferies

We expect TechM's 3Q revenues to decline by 1.6% QoQ in CC, due to furloughs and continued portfolio optimisation in the Communication vertical. We expect margins to expand by 330 bps QoQ (70bps on a normalised basis) due reversal of one-offs and operational efficiencies, somewhat offset by revenue decline. The focus would be on strategy under new leadership.

Axis Securities

We expect the company to report revenue growth of 0.5% on a QoQ basis while its margins are likely to expand due to strong growth in