The share price of Tech Mahindra fell on Tuesday after the IT services major reported a 17.4 percent sequential fall in consolidated net profit at Rs 1,081.4 crore for the quarter ended March 2021. The company’s net profit in the previous quarter was Rs 1,309.81 crore.
Consolidated revenue during Q4FY21 grew by 0.9 percent to Rs 9,729.9 crore from Rs 9,647.1 crore in the December quarter. In dollar terms, Tech Mahindra's revenue was at $1,329.6 million, registering a sequential growth of 1.6 percent, but lower than estimates of 2.7 percent growth.
Constant Currency (CC) revenue growth was at 0.7 percent versus CNBC-TV18's poll estimate of 2 percent.
Here's what brokerages have to say on Tech Mahindra's Q4 performance and the stock:
Tech Mahindra's results are similar to its peers' with underwhelming revenue growth, steady cost control and strong deal wins, said CLSA. The management indicated its deal pipeline remains robust and it is hopeful of conversion staying strong, at least in 1Q22, which is positive for its FY22 and FY23 revenue growth outlook, it said.
"We make minor changes to our FY22/FY23 EPS estimates. Risk-reward appears attractive given an inexpensive valuation and improved payout. We retain our Buy rating and Rs 1,200 target price," CLSA said.
Citi said it is disappointed with growth while EBIT margin came in ahead. "The deal TCV at $ 1 billion+ was a good step-up versus the past few quarters. The management indicated that Q1 should also be along similar lines," it said.
Citi maintained a Buy call with a target price of Rs 1,100 per share.
JPMorgan upgraded estimates for Tech Mahindra’s revenue by 1/2 percent, margin by 50 bps/65 bps for FY22/23. EPS estimates have been raised by 5 percent over FY22/23. It believes there’s a potential for upward surprises on FY22 revenue & margin.
It maintained an Overweight rating with a target price of Rs 1,230 per share.
Motilal Oswal expects the company to deliver double-digit growth in FY22E, however, the extent is likely to be lower than its peers. "We expect some normalisation in the margin, which would lead to a lower P/E multiple."
It maintained a Neutral rating with a target price of Rs 1,050 per share.
"A strong deal pipeline would help it post double-digit revenue growth in FY22; while optimization of margin levers would enable it to manage 15%+ EBIT margin in FY22, factoring in the wage hike being implemented from April quarter," said Yes Securities.
"The valuation remains attractive as the stock trades at PE of15x on FY23 earnings, given better growth outlook. Initiate coverage on the stock with ADD rating," it added.
Improving deal pipeline, focus on large deal wins, traction in 5G spend (on communication & enterprise side), the revival of growth in manufacturing, acceleration in Europe and cloud is expected to drive revenues, as per ICICI Direct.
ICICI Direct has a Buy call and a target price of Rs 1,120 per share.
At 10:35 am, the stock was trading 0.96 percent lower at Rs 953.95 apiece on the BSE.
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