Q1 Results: Brokerages Maintain Mostly Positive Ratings On Tech Mahindra Even As Profit Misses Estimates

Most analysts maintained their investment recommendation on Tech Mahindra Ltd. on strong deal wins and a robust order pipeline. That comes even as higher employee and visa costs hit profitability in the quarter ended June.

While the software services provider’s net profit and operating profit fell 15 percent and 27 percent, respectively, over the preceding quarter in the three months ended June, it signed about $475 million total contract value deals during the period.

Here’s what the brokerages have to say about Tech Mahindra’s first-quarter performance:

Morgan Stanley

• Maintains ‘Overweight’ with a target price of Rs 765 apiece.
• Growth to improve in the current financial year.
• Growth to be driven by communications vertical.
• Company to see the impact of strong deals, robust pipeline.
• It could deliver 8 percent growth.

CLSA

• Maintains ‘Outperform’ but cuts target price to Rs 740 from Rs 800 apiece.
• Revenue miss led by telecom and enterprise, but deal win strong.
• Margins likely to remain under pressure unless growth picks up.
• Valuation inexpensive with growth acceleration still ahead.

UBS

• Maintains ‘Neutral’ with a target price of Rs 830 apiece.
• Revenue and margin miss set the stage for a soft FY20.
• Management attributed decline in revenue and margins to seasonality.