Neutral Tech Mahindra; target of Rs 1080: Motilal Oswal

Motilal Oswal recommended Neutral rating on Tech Mahindra with a target price of Rs 1080 in its research report dated April 28, 2023.

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April 28, 2023 / 22:37 IST

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Motilal Oswal's research report on Tech Mahindra

Tech Mahindra (TECHM)’s 4QFY23 revenue of USD1.67b rose 0.3% QoQ in CC, a tad ahead of our estimates of 0.7% decline. Retail (-10% QoQ) dragged 4QFY23 growth. EBIT margin was down 80bp QoQ to 11.2% (v/s estimate of 11.9%). The company delivered weak TCV of USD593m, down 25% QoQ. Weak macro environment, delayed decision making and cuts in discretionary spends hit 4QFY23 growth. Management indicated that the situation is likely to remain so in 1HFY24 before picking up in 2HFY24E. We see muted growth (4.7% CC) for FY24E given the low deal wins, poor exit to FY23 and likely weakness in 1HFY24. With macro stabilizing over 2HFY24E and pick up in 5G spends, we are factoring in FY25E USD CC growth of 10.1%. Overall, we expect TECHM to deliver 7.8% USD CAGR over FY23-25.

Outlook

We remain on the sidelines as we feel the current valuation fairly factors in the uncertainties around growth and margin. We cut our FY24/FY25 EPS estimates on weaker margin and muted outlook. We remain Neutral on the stock with a TP of INR1,080. Our TP implies 15x FY25E EPS.

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