Neutral Tech Mahindra; target of Rs 1110: Motilal Oswal

Motilal Oswal's research report on Tech Mahindra

Tech Mahindra’s (TECHM) FY23 annual report highlights that the inflationary environment has led to a massive shift in tech spending by enterprises. The spending is now finding its way through conserving resources and optimizing costs. Enterprises continue to accelerate the adoption of new-age technologies to drive innovation and enable a new operating model for making it consumer centric and agile. For 5G technology, which is still emerging and relatively new, TECHM has established a leadership team in the space, and its 5G-related revenue crossed USD1b in FY23. In FY23, TECHM reported new deal TCV of USD2.9b (book-to-bill of 0.4x), with a major proportion of digital transformation projects. Given a delay in decision making amid adverse macros, the conversion remains a challenge in the near to-medium term.

Outlook

Considering the near-term weakness, we await greater comfort on sustainable and profitable growth. We value the stock at 16x FY25E EPS. We maintain our Neutral rating.