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What should investors do with Tech Mahindra after Q4 numbers: buy, sell or hold?

The software services company reported a 17.4 percent sequential decline in consolidated profit at Rs 1,081.4 crore for the quarter ended March 2021. Consolidated revenue for the quarter grew by 0.9 percent to Rs 9,729.9 crore from Rs 9,647.1 crore in the December quarter.

April 27, 2021 / 11:20 PM IST

Tech Mahindra share price rose over 2 percent in the early trade on April 27, a day after the software services company reported a 17.4 percent sequential decline in consolidated profit at Rs 1,081.4 crore for the quarter ended March 2021. The profit in the previous quarter was at Rs 1,309.8 crore.

Consolidated revenue for the quarter grew by 0.9 percent to Rs 9,729.9 crore from Rs 9,647.1 crore in the December quarter.

Also Read: Tech Mahindra Q4 profit falls 17.4% to Rs 1,081.4 crore, revenue grows at 0.9%

Here is what brokerages have to say about the stock and company after Q4 earnings:

CLSA | Rating: Buy | Target: Rs 1,200

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The revenue missed estimates. Making minor changes to its FY22/FY23 EPS estimates. The risk-reward appears attractive given an inexpensive valuation.

Citi | Rating: Buy | Target: Rs 1,100

Disappointed on growth, while EBIT margin came in ahead. The deal TCV at $ 1 billion +  was a good step-up versus the past few quarters. The management indicated that Q1 should also be along similar lines.

JPMorgan | Rating: Overweight | Target: Rs 1,230

The broking firm has upgraded revenue by 1/2 percent and margin by 50 bps/65 bps for FY22/23. EPS estimates have been raised by 5 percent over FY22/23. There’s a potential for upward surprises on FY22 revenue and margin.

Reliance Securities | Rating: Buy | Target: Rs 1,100

We believe TechM deserves multiple re-rating considering industry-leading EPS CAGR over FY22-23E driven by a sharp rebound in EBIT margin and strong double-digit topline growth owing to the uptick in global 5G rollout and higher demand for enterprise technology. At CMP, TechM trades at 15.5x on FY23E EPS, which is at around 25-40 percent discount to larger peers.

Sharekhan | Rating: Buy | Target: Rs 1,150

We have broadly maintained our earnings estimates for FY2022E/FY2023E, factoring in impressive margin performance in Q4FY2021 and mega-deal momentum. We believe the enterprise segment could outperform peers on growth, given the strong recovery in its sub-verticals, healthy deal pipeline, improved competencies and a sharper go-to-market strategy.

Tech M is well placed to benefit from the expansion of 5G value chain across networks and IT services when a pick-up in investments by service providers and higher 5G adoption by enterprises happen.

Dolat Capital | Rating: Accumulate | Target: Rs 1,060

Factoring the double-digit growth outlook backed by strong a recovery in TCV wins (growth assumptions are broadly unchanged for FY22/23E) in Q4 along with its 15 percent+ OPM guidance, we have scaled up our OPM estimates by 93bps/68bps, respectively.

The OPM outlook is backed by a strong exit quarter run rate of 16.5 percent and operating levers available that may help in covering up the upcoming tailwinds. As a result, EPS estimates have been upgraded by 4 percent/3 percent for FY22/23E.

Motilal Oswal | Rating: Neutral | Target: Rs 1,050

We expect the company to deliver double-digit growth in FY22E, however, the extent is likely to be lower than its peers.

We expect some normalisation in margin, which would lead to a lower P/E multiple. We value the stock at 16x FY23E EPS, a 40 percent discount to our target P/E for TCS

ICICI Direct | Rating: Buy | Target: Rs 1,120

Improving deal pipeline, focus on large deal wins, traction in 5G spend (on communication & enterprise side), revival of growth in manufacturing, acceleration in Europe and cloud is expected to drive revenues. This, coupled with improving margin trajectory and attractive valuation, has prompted us to be positive on the stock.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,132

Our estimates largely remain unchanged as we were factoring in double-digit revenue growth in FY22 (10.5 percent) and our EBIT margin estimates are at 15.4 percent for FY22.

Management focus on transformation has worked out well and we have seen strong margin performance in the last three quarters and deal win momentum is going to sustain in the coming quarters also.

At 0920 hours, Tech Mahindra was quoting at Rs 982.20, up Rs 19.05, or 1.98 percent on the BSE.

The share touched a 52-week high of Rs 1,081.35 on January 11, 2021 and a 52-week low of Rs 490.10 on May 6, 2020. It is trading 9.17 percent below its 52-week high and 100.41 percent above its 52-week low.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Apr 27, 2021 09:34 am
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