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CLSA sees a 15 percent margin feasible for Tech Mahindra; retains 'buy' call

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Brokerage firm CLSA is bullish on Tech Mahindra as it sees a 15 percent margin feasible for the IT major.

Brokerage firm CLSA is bullish on Tech Mahindra as it sees a 15 percent margin feasible for the IT major. The brokerage maintains a 'buy' call on the stock with a target at Rs 1,180 per share.
“The company also shows confidence to hold the FY22 earnings before interest and taxes (EBIT) margin at 15 percent despite headwinds from an impending salary hike, resumed hiring, and likely transition costs for large deals,” stated the report.
CLSA noted that its analysis indicates that this is feasible if attrition costs remain in control.
It also sees upside risk to FY22 earnings per share estimates that are built on a conservative margin outlook. The potential for capital return and upside from 5G makes risk-reward attractive for the company, added the brokerage.
It further stated that the company sees a pick-up in deal momentum that could shift its quarterly order-book significantly.
"The shift in the company quarterly order-book could be above its normal run-rate in the near term and help the company to lower the gap in revenue growth versus peers over FY22," CLSA noted.

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