Worst Over For Tech Mahindra, Brokerages Say
Brokerages expect Tech Mahindra Ltd. to report high single-digit revenue growth in the the financial year 2018-19.
“The worst may be behind” the IT major as synergistic deals provided its mergers and acquisition strategy some comfort, Credit Suisse said in a note after attending an analyst meeting hosted by the company at its Pune facility.
The outlook is incrementally improving and the portfolio challenges in telecom appear to be a thing of the past, Morgan Stanley said in its report. “We have assumed growth improves to 7 percent year-on-year in FY19, but based on the positive commentary, there could be upside risk to our estimates.”
Here are the key takeaways from brokerages which attended the analyst meet.
- Synergies coming through in some of the recent acquisitions.
- Key margin levers are continued focus on co-innovation with clients, recovery in IT margins of merged entities like Lightbridge Communications Corporation and Comviva and Complex.
- Earnings before interest and tax to grow at compounded rate of 18 percent over the next three years.
- Going ahead, the IT major will be focusing on smaller mergers and acquisitions to add new capabilities.
- The brokerage reiterated its ‘outperform'’on the stock with a price target of Rs 550, implying a potential upside of nearly 10 percent.
- Tech Mahindra’s continued focus and improvement in telecom has led to the company partnering with all major communications service providers.
- Revenue trajectory to witness slow and steady recovery with nearly 8 percent revenue growth expected over the next three years in compounded annual growth rate terms.
- Earnings to grow at a compounded rate of 11 percent in the next three years.
- The brokerage reiterated its ‘buy’ on the stock with a price target of Rs 496, reflecting a potential upside of nearly 22 percent.
- Expects a top line growth of nearly 7 percent, with upside risks given the management's positive commentary.
- Organic revenue to grow to 10-11 percent in the next year, with better margins and flat growth in earnings per share.
- If growth and margins surprise positively, earnings per share could grow to 6-7 percent in the next two years, and the stock could gain up to 14 percent if price to earnings valuations are better.
- The brokerage reiterated its ‘outperform’ on the stock with a price target of Rs 500.