The stock of Tech Mahindra fell as much as 5.6% to an intra-day low of Rs 1,444.25 before recovering inline with the buoyant sentiment across the IT Index. The company’s Q1 net profit jumped 23% YoY to Rs 851.5 crore.
JM Financial on Tech Mahindra
According to the brokerage house JM Financial Services, the tech giant’s turnaround efforts, which it set in the previous quarter, are off to a good start. The company’s management is not taking its eyes off the growth/investment agenda either. Front-end investments – multi-tower solutions team, client and delivery partners for top accounts– are put in place. All of the positives are despite no material improvement in underlying demand. “That lends credence to its growth/margin target. We pull forward margin improvement trajectory driving a 1-12% EPS upgrade,” said JM Financial. The broking firm raised the target price to Rs 1,760 from Rs 1,430 per share. It maintained the “Buy” rating on the stock as JM Financial believes that the bulk of the improvement is still ahead.
The other brokerage firm StoxBox said that in an otherwise seasonally weak quarter, Tech Mahindra posted a strong set of numbers, which beat or were in line with street estimates. Sequential growth was observed in most verticals except for communication which was expected to underperform. According to Manish Chowdhury, Head of Research at StoxBox, the expansion in margins can be attributed to stringent cost control measures which offset the visa costs in the quarter. The company also reported strong deal wins from US and UK telecom giants and in the healthcare space. “We expect the deal wins to improve further as it’s been below the guided range of $700 million -1 billion for 6 consecutive quarters.
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Further, any comments from the company’s management on strategic initiatives, particularly in the BFSI sector, comments around average resource cost, and demand recovery in the CME vertical will be critical areas to watch out for, concluded Chowdhary.
Tech Mahindra up almost 140% in 5 years
Tech Mahindra’s stock has risen around 3% in the last five days and given a return of 17% in the last six months. While the giant’s stock raised the investors’ wealth by 35% in a year. It has increased its value by 139% in the past five years.
To compare the benchmark index Nifty 50 has risen 0.9% in the last five days and 14% in the past six months. It has given a return of 25% in the past one year and around 120% in the last five years.
