Reduce Tech Mahindra; target of Rs 1300: Sharekhan

Sharekhan recommended reduce rating on Tech Mahindra with a target price of Rs 1300 in its research report dated January 24, 2024.

Broker Research

January 29, 2024 / 18:32 IST

reduce

Sharekhan's research report on Tech Mahindra

Q3FY24 revenue stood at $1,573 million, up 1.1% q-o-q/ down 5.4% y-o-y beating our estimates of 0.8% q-o-q decline in CC terms, aided by the manufacturing, retail and Others verticals; this was partially offset by weakness in BFSI and Technology verticals. EBIT margin rose 65 bps q-o-q to 5.4% on account of lower cost of sales yet lagged our estimate of 5.6%. Net new deal win TCV stood at $381 million, down 42%/52% on q-o-q and y-o-y basis respectively. Management stated that though the market environment is slightly more positive currently than it was two quarters ago but said it’s still too early to call it green shoots.

Outlook

We believe that continuing challenges in the telecom sector may continue to impact Tech Mahindra’s earnings outlook. Hence, we maintain Reduce on Tech Mahindra with revised PT of Rs 1300 (the increase in PT reflects increase in target multiple to factor anticipated recovery from restructuring efforts). At CMP the stock traded at 24.4/20.5x its FY25/26E EPS.

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