Brokerages neutral on Tech M, negative on Infy, but investors cheer Mohit Joshi’s move

Brokerages believe Tech Mahindra stock can re-rate marginally in the near-term but a structural re-rating can happen only over medium term

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Putting all speculation to rest, Tech Mahindra has selected Mohit Joshi of Infosys as its managing director and chief executive officer from December. In an uncertain macro environment, foreign brokerages see this as a neutral move at best.

“Great CEO choice, but a turnaround is not easy and will take time. Tech Mahindra faces structural challenges in matching leading peers in organic growth and margin,” said analysts at JPMorgan.

They believe the stock can re-rate marginally in the near term but a structural re-rating can happen only over the medium term. They have a ‘neutral’ rating on the stock with a target of Rs 1,100 per share.

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Citi, too, has similar views. “The real test of performance will start next calendar year once Mohit Joshi assumes the CEO role. The market will again focus on the pace of turnaround, which can potentially take time,” it said. The brokerage has a ‘neutral’ rating on the stock with a target of Rs 1,120 per share.

Analysts at Nomura also do not expect any immediate strategy change after the new CEO joins.

Investors, however, cheered the selection for the corner office and Tech Mahindra shares zoomed in early trade on March 13. The shares traded at Rs 1152 on the NSE, higher by 8 percent, at 9:30am. This marked the stock’s best day in nearly 7 years.

On the flipside, Joshi’s departure from Infosys is seen as a negative in the near-term. At Infosys, he is the head of the Global Financial Services & Healthcare and the software businesses, which include Finacle (the banking platform) and the AI/automation portfolio.

JPMorgan believes that his departure highlights the depth of Infosys’ leadership and the inability to provide adequate career mobility to senior talent. In just six months, this is Infosys’ second loss of a senior leader to a tier-1 rival. CLSA has also noted that Infosys will need to find a quick replacement to ensure minimal business disruptions.

Also Read: Mohit Joshi’s appointment as Tech Mahindra CEO will bring BFSI and healthcare expertise: Industry experts

In October 2022, Infosys President Ravi Kumar resigned to take charge as the top boss of Cognizant.

JPMorgan has a ‘neutral’ rating on Infosys with a target of Rs 1,700 per share. CLSA has ‘buy’ rating with target at Rs 1,800 for the tech major. Infosys was quoting at Rs 1,460 per share on the NSE at 9:30 am, lower by 0.75 percent. ?

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