TechM is the largest Indian IT services player in the TSP space. IT spend by TSPs is expected to remain robust – and TechM should be a prime beneficiary given its strong relationships with the likes of BT (which owns 31% of the company) and AT&T.
Target FY09E P/E multiple of 21x represents a 10% premium to our fair-value multiple for Satyam – which Citi believes is justified by TechM’s 32% recurring EPS CAGR over FY07-FY10E (vs. 20% for Satyam).With superior growth prospects, TechM should continue to trade at a premium to more diversified players like Satyam / HCL Tech and i-Flex.
Tech Mahindra is likely to report a fully diluted EPS of Rs 63.55 and Rs 91.23 for FY08 and FY09 respectively.
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