Buy Tech Mahindra; target of Rs 1207: KR Choksey

KR Choksey is bullish on Tech Mahindra has recommended buy rating on the stock with a target price of Rs 1207 in its research report dated April 28, 2023.

Broker Research

May 02, 2023 / 12:56 IST

Buy

26 Aug, 2025 12:21

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KR Choksey's research report on Tech Mahindra

Tech Mahindra Ltd (TECHM) has received a net new deal win of USD 592 million and has a free cash flow for the quarter of USD 142 million. The revenue from operations has increased to INR 1,37,182 million in Q4FY23 from INR 1,21,163 million in Q4FY22, an increase of 13.22% YoY basis, and on QoQ basis it remained flat. The EBIT came at INR 13,178 million in Q4FY23 from INR 16,459 million in Q3FY23 showing a decline of 19.94% QoQ and a 13.42% decline on a YoY basis which was effected by higher SG&A expense. EBIT margins stood at 9.60%, declined by 238 bps QoQ/364 YoY. EPS for Q4FY23 stood at INR 12.62 versus INR 14.64 and INR 16.94 in Q3FY23 and Q4FY22 respectively. The concentration from the top 5 clients has declined to 17% in Q4FY23 from 22% in Q4FY22. The employee Attrition rate has significantly declined to 15% in Q4FY23 from 24% in Q4FY22 and 17% in Q3FY23. Utilization rate excluding trainees stood at 86% in Q4FY23 a marginal improvement from 84% in Q4FY22.

Outlook

Tech Mahindra is currently trading at a valuation with a P/E multiple of 15.8x/11.9x on FY24E/FY25E earnings. The story is premised on pipeline commentary, improved services portfolio (design, engineering and consulting) & acquisition synergies, and 5G-related spending and reduction in the attrition rate and hence we are assigning a P/E multiple of 14.0x to the FY25E estimated EPS of INR 86.2 to arrive at a target price of INR 1,207 (earlier the target price was INR 1189), with an upside of around 17.9%. Accordingly, we kept our rating to a “BUY” for the stock.

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