Major broking firms have maintained buy/hold rating on Tech Mahindra post fourth quarter results. The company managed to beat street expectations and delivered healthy growth in topline as well as the bottomline.
Mahindra group's technology arm Tech Mahindra reported 25 percent jump in its fourth quarter consolidated net profit at Rs 377 crore compared to previous quarter last year while revenue soared 35 percent to Rs 1,907 crore. The results were better than analysts' expectation of profit of Rs 368 crore on revenue of Rs 1,833 crore.
The management of the company remained optimistic for FY14. "There has been an uptick in spending, even in discretionary spending in the US. The need for telecom has grown and diversified which is creating an insatiable demand for data," said Vineet Nayyar, executive vice chairman Tech Mahindra.
Broking firms are out with their verdict on the results. Foreign brokerage house Goldman Sachs has maintained a ‘Buy’ rating on Tech Mahindra with a price target of Rs 1,300 citing that the stock is trading at attractive valuations and at 31% discount to HCL Technologies, its closest peer in terms of scale.
Domestic broking firm Religare is positive on the stock and has maintained 'Buy' rating with a price target of Rs 1200 based on 11 times FY14 price-earnings multiple. The research firm believes that update on the merger process and continued deal traction will be the key triggers for a valuation re-rating.
Jefferies has maintained a "Hold' rating on the stock citing contimuous reduction in headcount a serious concern. The brokerage house has revised price target to Rs 1030 based on 9 time price-earnings multiple on the merged entity's Mar'15E EPS (previously Rs 1,020 based on Sep’14E), which is at a discount to its closest peer HCL Technologies.
Kotak Institutional Equities has raised its rating on Tech Mahindra to 'Add' from 'Reduce' following 12 percent correction in the stock price in the past three months.
"Despite our reservations on organic growth for FY2014E and acquisition strategy, one cannot ignore recent correction in stock price that has made valuations attractive again. Stock trades at 10 times FY2014E earnings. We upgrade to ADD with marginal roll-over driven increase in 12-month target price to Rs 1050," said the Kotak note to clients.