Tech Mahindra may go to Rs 646, says Mayuresh Joshi

Mayuresh Joshi of Angel Broking told CNBC-TV18, "The profit warning that Tech Mahindra has sounded of clearly was an indication of a weaker quarter to come by. So Q1 and Q2 expected to remain soft because profit warning primarily come on account of weaker earnings expected of their organic communication businesses which contributes roughly 52 percent of their topline. If you look at the enterprise part of the business, it has been doing fairly reasonably okay for Tech Mahindra and that is expected to grow organically quite reasonably well over the next few quarters, so there are a few headwinds, tailwinds that the company is obviously facing.""Headwinds in the form of higher visa costs and clearly the kind of profit warning expected from the telecom business. Tailwinds in terms of a stable currency coming through and expectations of improvement in utilisation rate, so clearly based on the profit warning we also have cut down our numbers both in terms of topline and the profitability for the company by 5 and 6 percent respectively. However, our take is that from third quarter FY16 onwards better numbers will start getting reflecting," he added."Cost optimisation efforts as the management indicated are already on and the operating leverage benefit it should start kicking in. So, my take is that keep a horizon of more than a year, valuations at this point of time are also extremely attractive at around 13.7 times FY17. Clearly keep patience on to the stock. The next couple of quarters are going to be soft and weak but clearly with a year or 15 months time horizon we are still maintaining a target price of Rs 646," he said.