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Global brokerage firms such as Goldman Sachs, CLSA, and Morgan Stanley raised their 12-month target price for Tech Mahindra post Q4 results, after its net profit grew by 29.6 percent to Rs 1,222 crore compared to Rs 943.1 crore in the last quarter.
The Mumbai-based IT services firm reported 3.6 percent growth in revenue at Rs 8,054.5 crore in rupee terms as against Rs 7,776 crore (QoQ). It reported a dollar revenue of USD 1,244.3 million.
The most aggressive 12-month target for Tech Mahindra was set up by Goldman Sachs of 880 which translates into a gain/upside of 23 percent from Friday’s closing price of Rs 714 on the BSE.
Analysts polled by Reuters, on average, had expected Rs 79,928 crore in revenue and profit of Rs 9,408 crore.
The company also said Milind Kulkarni, the Chief financial officer will retire as the CFO on 31 May 2018. Manoj Bhat will take over as the CFO from June 1. And, the board recommended a dividend of Rs 14 per share on par value of Rs 5 (280%) for the financial year ended March 31, 2018.
We have collated views from different brokerage firms on Tech Mahindra post Q4 results:
Goldman Sachs: Buy| Target raised to Rs 880 from Rs 824 earlier.
Goldman Sachs maintains a buy rating on Tech Mahindra post Q4 results but raised its 12-month target price to Rs 880 from Rs 824 earlier.
The Q4 results were above expectations on continued margin beat. The entire topline growth was led by enterprise business in Q4. Going forward, 5G remains a key structural growth opportunity for Tech Mahindra, said the report.
Macquarie: Neutral| Target Rs 670
Macquarie maintains a neutral rating on Tech Mahindra post Q4 results with a target price of Rs 670. The Q4 profits were above estimates due to forex gains and profit on the sale of land.
The global investment bank expects the EBIT margin normalisation to continue. The outlook for the telecom business remains muted and 5G spends are at least a year away.
CLSA: SELL| Raise target price to Rs 600 from Rs 540 earlier
CLSA maintains a sell rating on Tech Mahindra but raised its 12-month target price to Rs 600 from Rs 540 earlier. The global investment bank maintains sell largely on growth concerns.
The Q4 saw in-line revenue despite the telecom drag. Stellar margin expansion continued which helped Tech Mahindra post good results. However, CLSA expects it to lag the growth recovery in FY19-20. It lifted its target multiple to 13.5x 1-year forward.
Morgan Stanley (MS): Overweight| Raise target to Rs 800 from Rs 675
Morgan Stanley maintains an overweight rating on Tech Mahindra post Q4 results but raised its 12-month target price to Rs 800 from Rs 675 earlier.
The March quarter results were good and the momentum building for FY19 is likely to continue as the worst in communication vertical is behind us, said the note.
Tech Mahindra saw a strong momentum in enterprise vertical to continue. Morgan Stanley expects margin to improve to 16.8 percent in FY19 and expects EBITDA CAGR of 17 percent over FY18-20.
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