Buy, Sell or Hold: What should investors do with Tech Mahindra post Q3 results?

Most global brokerage firms remain mixed on Tech Mahindra post-December quarter results after the Indian multinational information technology services and consulting company reported a 2.2 per cent QoQ rise in the consolidated profit at Rs 1,369 crore for the quarter ended December 31, 2021.

It had posted a profit of Rs 1,339 crore in the previous quarter ended September 30, 2021.

The most aggressive target price of Rs 2220 was put out by Nomura which translates into an upside of over 47 per cent from Rs 1506 recorded on 1st February.  

Revenue from operations grew 5.2 per cent QoQ to Rs 11,451 crore in the reported quarter against Rs 10,881 crore posted in the previous quarter. In dollar terms, the revenue grew 4.1 per cent to $153.35 crore against $147.3 crore posted in the September 2021 quarter.

EBIT stood at Rs 1,698 crore, up 2 per cent QoQ against Rs 1,652 crore posted in the previous quarter.

Margins declined to 14.8 per cent in Q3FY22 against 15.2 per cent posted in Q2FY22. The attrition rate was at 24 per cent during the quarter as against 21% in the preceding quarter. Net new deal wins stand at $70.4 crore.

We have collated a list of recommendations from various global brokerage firms according to a Zee Business TV report:

Nomura: Buy| Target Rs 2220

Nomura maintained a buy rating on Tech Mahindra post December quarter results that translates into an upside of over 47 per cent from Rs 1506 recorded on 1st February.

Revenues were better than expected while the near-term supply challenges weighed on margins, said the note.
 
Strong revenue growth was led by the CME vertical. Deal wins set the stage for strong growth in FY23F, said the note.

JPMorgan: Neutral| Target Rs 2000

JPMorgan maintained a neutral rating on Tech Mahindra post-December quarter results with a target price of Rs 2,000 that translates into an upside of over 32 per cent from Rs 1506 recorded on 1 February.

Morgan Stanley: Overweight| Target Rs 2100

Morgan Stanley maintained its Overweight rating on Tech Mahindra but slashed its target price to Rs 1980 from Rs 2100 earlier.

Goldman Sachs: Neutral| Target Rs 1601

Goldman Sachs maintained Neutral rating on Tech Mahindra post December quarter results with a target price of Rs 1601.

The earnings were below expectation amid a tight supply chain with lower pricing power that might hurt margins.
 
“We believe Co’s digital capability is weaker compared to its peers, impact visible in lower margins,” said the report. The investment bank slashed FY22E EPS estimates by 5% due to lower margins.

UBS: Sell| Target Rs 1260

UBS maintained sell rating on Tech Mahindra post Q3 results with a target price of Rs 1260.

The Q3 revenue was largely in-line with estimates but margins were a miss. Slower hiring is likely to cause concern.
 
The management noted that it is committed to delivering broad-based profitable growth backed. Barring a sector-wide rally, we expect a negative reaction, said the note.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)