Information services player Tech Mahindra's fiscal fourth-quarter earnings came short of estimates, prompting brokerages to cut growth targets for the IT company.
The company's net profit rose 29.50 percent to Rs 661 crore, falling short of Moneycontrol's estimate of Rs 709.47 crore. Revenue fell 2 percent sequentially to Rs 12,871 crore against estimates of Rs 12,926 crore.
Continued slowdown across key verticals, including telecom, communications, media and entertainment, pulled the company's Q4 earnings down.
Brokerage Jefferies expects weak near-term growth for Tech Mahindra, based on the company's weak order book and headcount declines. Jefferies cut its growth estimates by 4-9 percent and margins to FY26/27. The brokerage also slashed its price target for the stock to Rs 1,065 and retained its "underperform" call.
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CLSA said the earnings highlight chinks in the company’s armour. The brokerage cut its EBIT margin and EPS targets by 13 percent and 12 percent, respectively, for FY25 and FY26. CLSA has a “buy” call on the stock with a price target of Rs 1,589.
To bring about a turnaround, Tech Mahindra CEO and MD Mohit Joshi unveiled a three-year roadmap to drive better revenue growth than peer average and optimising margin improvement by FY27.
Joshi's FY27 strategy aims to take the company ahead of its peers’ average growth and to a 15 percent EBIT margin.
According to brokerage HSBC, the turnaround plan looks sensible but its execution remains challenging, especially in the current macroeconomic backdrop.
The brokerage said Tech Mahindra's margin expansion is highly contingent on pyramid improvement, while maintaining average pricing, as the outlook for the sector remains lacklustre.
HSBC has stuck to its “hold” call, with a price target of Rs 1,300.
Nuvama, too, is cautious on Tech Mahindra's ambitious targets. The targets are achievable but the steps needed to achieve them will cause significant near-term pain, it said.
Nuvama trimmed its FY25/26 target by 2 percent/1.5 percent. The brokerage has a “reduce” rating on the stock with a target of Rs 1,000.
On April 25, shares of Tech Mahindra settled 5 percent higher at Rs 1,250 on the NSE.
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