BNP Paribas puts "Buy" on Tech Mahindra
BNP Paribas initiates coverage on Tech Mahindra with a 'Buy' rating.
By ET Bureau |
TECH MAHINDRA
RESEARCH : BNP PARIBAS
RATING: BUY
CMP: RS 952
BNP Paribas initiates coverage on Tech Mahindra with a `Buy' rating. They believe that TECHM's share price neither fully reflects the value of its core business nor the potential upside from its 42.7% stake in Satyam. The core business trades at 9.1x FY10E P/E compared to the sector average of Infosys, TCS, and Wipro, of a 19.7x.
The valuation discount will narrow when stability in the demand returns and Satyam's earnings improve post its operational restructuring. Satyam's acquisition could be a game changer. The acquisition is already a successful investment, with the current market value 103% higher than what TECHM paid for it.
Also, given the inexpensive deal valuation, BNP calculates that Satyam would be accretive to TECHM's earnings. The target price implies an 11.6x FY11E P/E and is still below the large cap average of 18.7x and mid-cap average of 12.4x.
RESEARCH : BNP PARIBAS
RATING: BUY
CMP: RS 952
BNP Paribas initiates coverage on Tech Mahindra with a `Buy' rating. They believe that TECHM's share price neither fully reflects the value of its core business nor the potential upside from its 42.7% stake in Satyam. The core business trades at 9.1x FY10E P/E compared to the sector average of Infosys, TCS, and Wipro, of a 19.7x.
The valuation discount will narrow when stability in the demand returns and Satyam's earnings improve post its operational restructuring. Satyam's acquisition could be a game changer. The acquisition is already a successful investment, with the current market value 103% higher than what TECHM paid for it.
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Also, given the inexpensive deal valuation, BNP calculates that Satyam would be accretive to TECHM's earnings. The target price implies an 11.6x FY11E P/E and is still below the large cap average of 18.7x and mid-cap average of 12.4x.
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