KIM ENG Securities has initiated coverage on Tech Mahindra with a ‘Buy’ recommendation. It has set a target price of Rs 1213 on the stock.

“Tech Mahindra (TECHM) should perform well on an expected Rs 9 billion earnings contribution from 43%-owned Satyam Computer Services (now called Mahindra Satyam).

TECHM has managed Mahindra Satyam for 6 months and has improved its reputation after last year’s scandal and reduced financial risk. TECHM will also benefit from improving business for major client, British Telecom, which accounts for 50% of TECHM’s FY10F revenue and 60% of FY11F revenue.

Other positives for TECHM include declining SG&A, lower interest cost and an improving balance sheet (company is quickly paying down Rs21bn in debt associated with investment in Satyam). Our share TP for TECHM is Rs 1,213 with core business valued at Rs 892 (based on a PER of 15x FY11F) and the stake in Mahindra Satyam valued at Rs 321,” the recommendation said.

No doubt Tech mahindra is expert in managing the figures but sustaining growth with falling BT business is real challenge. Telecom segment is looking desperately for value addition and innovation and Tech Mahindra needs to show its consultancy skills with some excellent demo pieces which prove their worth in Telecom industry. Enhancement of productivity, value addition by doing things differently and innovation is the need of the hour and Tech Mahindra must see where they stand to face competition from infosys, TCS, WIPRO and other Mid cap entrants in telecom sector. Satyam Mahindra will be successful in retaining current business because of their knowledgebase but getting new business is still huge challenge. Non availability of financial statements for the last year is big black spot and no new client will place huge orders unless and until the financial picture opens up. Getting new business is becoming more tough when players like TCS, Infosys etc. are ready to snatch away the business and ready to negotiate competitive prices in the current environment. With this background retaining talent is another challenge because this talent can easily be attracted by other IT leaders. So though acquiring Sat yam is an excellent move taking this forward is a big challenge.. With all these challenges let us hope Tech Mahindra managment manages the figures and meet the investors expectations.

There is no movement of Techmahindra 4 d simple reason that it has not published provisional figure og Mahsatyam Investors r there4 not able to take view on its future earning.It is in d interest of shareholders that Techm gv pro figure of satyam 4 last 2 quart as they hv given 4 jan feb 2009.