Tech Mahindra shares in focus after Q2 net profit slips 4%

Consolidated revenue from operations for the second quarter of the financial year 2022-23 came in at Rs 13,129.5 crore, up 3.3 percent sequentially and 20.6 percent year-on-year.

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Tech Mahindra shares will remain in focus on November 2 – a day after company posted its September quarter earnings.

IT services provider Tech Mahindra on Tuesday reported a 4 percent year-on-year fall in consolidated net profit at Rs 1,285 crore for the quarter ended September 30, higher than analysts’ estimate of Rs 1,224 crore.

Sequentially, net profit jumped 13.6 percent from Rs 1,131.6 crore in the June quarter.

Consolidated revenue from operations for the second quarter of the financial year 2022-23 came in at Rs 13,129.5 crore, up 3.3 percent sequentially and 20.6 percent year-on-year.

Revenue stood at Rs 10,881.3 crore in the same quarter last fiscal.

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Here is what brokerages have to say about stock and the company post June quarter earnings

Nomura

We have kept the ‘buy’ rating on the stock with a target at Rs 1,160 per share as the Q2 was broadly in-line, while outlook is sketchy.

The revenue performance was strong, despite pruning initiatives in Q2, while deal wins remain robust, reported CNBC-TV18.

CLSA

We have maintained the ‘underperform’ tag on the stock with a target at Rs 1,070 per share.

The margin management remains a challenge but valuation lends support. The Q2 revenue and margin were in-line, while near-term outlook is steady, said CLSA.

Find few triggers in results/ commentary to attract investor interest, reported CNBC-TV18.

Sharekhan

At CMP, the stock is trading at a reasonable valuation of 18.1x/16.2x its FY2023E/FY2024E earnings estimates.

We continue to prefer Tech Mahindra, given healthy deal wins and reasonable valuation. We maintain a ‘buy’ rating with an unchanged price target (PT) of Rs 1,220.

Rupee appreciation and/or adverse cross-currency movements and/or constraint in local talent supply in the US would affect earnings. Further, macro headwinds and possible recession in the US are likely to moderate the pace of technology spending.

Nirmal Bang

While valuations are cheap, the kind of recessionary demand conditions we are getting into, they are likely to get still cheaper.

After 2QFY23, we have kept our FY24-FY26 EPS estimates constant and have arrived at an unchanged Target Price (TP) of Rs 889 (12.9x Sept ‘24E EPS, multiple maintained, 35 percent discount to the multiple given to TCS). We have maintained our ‘sell’ rating on stock.

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