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- 26 Jul 2024
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TECHM: MARGIN EXPANSION LED TURNAROUND BEGINS
TECHM - 1696 Change: 12.10 (0.72 %)News: Tech M in Q1FY25 reported revenue of US$ 1,559 mn, up 0.7% QoQ both in US$ and CC terms while it was down 2.6% YoY in US$ terms/ 1.2% in CC terms. In rupee terms the revenue came at ₹13,005 crore, up 1% QoQ / down 1.2% YoY. Geography wise America (52.4% of mix) grew 3.9% QoQ while Europe (23.4% of mix) and ROW (24.2% of mix) declined by 2.6% and 2.5% QoQ respectively. Segment wise on a QoQ basis Healthcare & Lifesciences (7.7% of mix), Retail transport & logistics (7.7% of mix), Manufacturing (18.3% of mix), BFSI (15.7% of mix) and Hi-tech & Media (13.8% of mix) which grew by 7.9%, 5.2%, 2.4%, 0.7% and 0.5% respectively while Others (3.7% of mix) and its largest vertical Communications (33.1% of mix) declined by 5.2% & 1.9% QoQ respectively. EBIT margin of the company increased by 110 bps QoQ to 8.5%. The company during the quarter won TCV of US$ 534 mn, up 6.8% QoQ/48.7% YoY. The company now has 25,000+ talent enabled on AI led pair programming vs 15,000 last quarter.
Views: The margins saw healthy expansion of 110 bps aided by operational efficiencies & savings from Project Fortius, moderation of subcon costs (+80bps) which were offset by headwinds from decline in revenue in Comviva (due to seasonality in communications vertical) and higher visa costs. The management mentioned that they see no change in the demand environment from the previous quarter, however, they expect FY25 to be better than FY24. We maintain a constructive view on the company.
Impact: Neutral