Tech Mahindra’s Target Price Hiked As Q2 Profit Beat Estimates
Tech Mahindra’s profit rose 17.2% sequentially to Rs 1,123.9 crore in Q2 on the back of revenue that rose 4.8% to Rs 9,069.9 crore
Most analysts hiked target price for Tech Mahindra Ltd. as lower tax expense and deal wins aided the company’s profit in the quarter ended September.
Net profit rose 17.2 percent sequentially to 1,123.9 crore in the July-September period on the back of revenue that rose 4.8 percent quarter-on-quarter to Rs 9,069.9 crore, according to an exchange filing.
Besides, Tech Mahindra won a record $1.49 billion worth of deals during the quarter, a media statement said. That included a multi-year agreement with U.S. telecom giant AT&T Inc. for network transformation and migrating to the cloud.
Analysts are confident that with large deal wins and a healthy pipeline the company would be able to improve its growth prospects.
Here’s what the brokerages have to say about Tech Mahindra’s Q2 Results 2019-20:
Phillip Capital
- Maintains ‘sell’ but hikes target price to Rs 600 from Rs 575 apiece.
- Strong results; but remains a structurally weak story.
- Top line growth boosted by enterprise segment, while margins expanded due to lower selling, general and administrative expense.
- Tech Mahindra is in an operationally precarious state, with low growth, high attrition, high utilisation and fewer levers for margins.
Morgan Stanley
- Maintains ‘overweight’ and hikes target price to Rs 850 from Rs 765 apiece.
- Second quarter revenue growth better due to strong growth in enterprise business.
- With strong order bookings and healthy pipeline, the company is confident of improving growth prospects.
- Valuations supportive and recent acquisition of BORN Group to drive up dollar revenue.
UBS
- Maintains ‘neutral’ with a target price of Rs 680 apiece.
- Revenue of $1,287 million above consensus expectations.
- Net profit beat on lower taxes, no one-offs.
- Of the $1.5-billion total contract value, $1 billion was from communications.
Edelweiss
- Maintains ‘buy’ with a target price of Rs 973 apiece.
- Operational efficiencies aided margins to tune of 100 basis points.
- All verticals except manufacturing showed robust momentum.
- Company saw ramp up in deal wins and incurred certain upfront costs.