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What should investors do with Tech Mahindra post Q1 results: buy, sell or hold?

Tech Mahindra reported a 30.8 percent jump in its June quarter net profit at Rs 1,353.2 crore against Rs 1,081.4 crore in the quarter ended March 2021.

July 30, 2021 / 09:34 AM IST
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Tech Mahindra share price touched a 52-week high of Rs 1,204.80, rising 7 percent in the early trade on July 30, a day after the company reported better-than-expected numbers for the June quarter.

The company reported a 30.8 percent jump in its first-quarter (April-June) net profit at Rs 1,353.2 crore against Rs 1,081.4 crore in the quarter ended March 2021.

The company's rupee revenue rose 4.8 percent at Rs 10,197.6 crore versus Rs 9,729.9 crore, QoQ.

Its earnings before interest and tax (EBIT) were down 3.6 percent at Rs 1,545.3 crore from Rs 1,603.7 crore and the margin was at 15.2 percent from 16.5 percent in the previous quarter.

Also Read: Tech Mahindra Q1 results: Net profit jumps 30.8 percent to Rs 1,353.2 crore; constant currency revenue growth at 3.9 percent


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

Citi | Rating: Buy | Target: Rs 1,380

Citi has retained “buy” rating as the company reported a good Q1 numbers with revenue /EBIT above expectations.

The deal TCVs was strong at $185 million for the second quarter in a row, while supply-side challenges were visible across the sector.

The company’s attrition increased to 17 percent LTM, while it saw high subcontractor costs in Q1. Broking firm has raised FY22/23 EPS estimate by 3-4 percent as the company is one of top picks.

Also read: Tech Mahindra adds 5,200 employees in Q1 FY22, vaccinates 80% staff

Bernstein | Rating: Outperform | Target: Raised to Rs 1,330 from Rs 1,200

Bernstein has kept the “outperform” call on the stock as the company saw a strong revenue and margin beat in Q1. The deal wins were healthy and the growth outlook has been maintained.

The broking house increased FY22/23 EPS estimates by 4.3 percent/4 percent. The management maintained a double-digit revenue growth outlook for FY22.

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JPMorgan | Rating: Overweight | Target: Rs 1,250

JPMorgan has maintained its “overweight” rating on the company after it reported a strong Q1 print, with a beat across revenues, margins and profits.

The net new deal wins were healthy at $ 815 million, while revenue grew 3.9 percent CC QoQ. The company CEO guided for Q1 revenue growth trajectory to continue for the rest of FY22.

Goldman Sachs | Rating: Neutral | Target: Rs 1,059

The company has done better than expected this quarter. The broking house increased EPS estimates and the target but remained on the sidelines, given the lack of broad-based digital capabilities.

Prabhudas Lilladher | Rating: Buy | Target: Rs 1,494

The management has outlined its strategy (repair, rally, rise beyond) to transform the business and accelerate growth and margins.

We are assigning target multiple of 20X (earlier 17X) on Sep-23 EPS of INR of 74.7 (35 percent discount to TCS 5-year average + 2SD of 30.6X) to arrive at a TP of INR 1494 (earlier: 1237) with revenue CAGR of 13.4 percent & EPS CAGR of 18.2 percent. TechM is trading at 17.7X/15.9X at EPS of INR 63.5/70.9 on FY22/23E respectively, inexpensive. Maintain “buy”.

Motilal Oswal | Rating: Neutral | Target: Rs 1220

We expect the company to deliver double-digit growth in FY22. However, the extent is likely to be lower than its peers. We value the stock at 17x FY23E EPS.

Sharekhan | Rating: Neutral | Target: Rs 1,300

We have raised upward our earnings estimates for FY2022E/ FY2023E/FY2024E due to a strong all-round beat in Q1FY2022, healthy deal wins, and a strong deal pipeline in the communication vertical.

The company is well invested in capturing opportunities from the expansion of 5G value chain across networks and IT services from both telecom service providers and enterprises. The company’s investments and multiple small acquisitions for enhancing capabilities in newer areas have resulted in consistent deal flows in the enterprise segment.

We assume Tech Mahindra will continue to generate higher free cash flow (FCF) in the coming years, which would increase dividend/buyback payouts.

At 9.17 am, Tech Mahindra was quoting at Rs 1,201.00, up Rs 73.25, or 6.50 percent, on the BSE.

Disclaimer: The above report is compiled from information available on public platforms. advises users to check with certified experts before taking any investment decisions.
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first published: Jul 30, 2021 09:32 am
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