Monday, March 4, 2024

Tech Mahindra: Stock fell by 7% after weak results, Buy or Sell or Hold? What should investors do?

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Tech Mahindra Stock Price: There is a huge fall in the shares of IT sector giant Tech Mahindra today. Today in intraday the stock fell by about 7 percent to the price of Rs 1320. Whereas on Wednesday it closed at Rs 1408. The company released its results for the December quarter on Wednesday, which were very weak. The company’s profit has decreased by 60 percent. There has also been pressure on margins. At present, the market is waiting for clarity regarding the company’s future strategy. The opinion of brokerage houses is mixed on Tech Mahindra’s stock.

What does Brorage House have to say?

Brokerage House Motilal Oswal has given a neutral rating on the stock of Tech Mahindra and a target price of Rs 1360. This is below yesterday’s closing price. The brokerage says that the company’s quarterly results have been weak, yet it is slightly better than expected. Increasing the company’s exposure in the communication vertical can bring further benefits. After 5G rollout, a new spending cycle may be seen in this space. The brokerage says that overall growth will remain weak in the near term and margins will be awaited to improve. The stock is at a valuation of 20x FY26E EPS.

Brokerage House Morgan Stanley has given overweight rating on the stock of Tech Mahindra and increased the target slightly from Rs 1100 to Rs 1220. The brokerage believes that the poor performance of the company will now end and the performance is expected to improve from here. The brokerage house says that better changes can be seen in the mid-term. However, pressure will remain in the near term.

Brokerage House HSBC has given a hold rating on Tech Mahindra and set a target price of Rs 1300. The brokerage says there are doubts over changes in the particularly tough macro environment. Margin expansion depends on pyramid improvements or increase in pricing.

Although Brokerage House Nomura has given buy rating on the share and has kept a target of Rs 1407. According to the brokerage, third quarter financials were better than estimates and margins were in line with expectations.

What does the company say

On the company’s third quarter results, Tech Mahindra Managing Director and Chief Executive Officer Mohit Joshi said that this quarter has been a mixed one. Growth was seen in manufacturing and healthcare segments, but spending in sectors like communications, BFSI and high-tech declined. This diversification of markets will take some time, but we are focusing on reorganizing ourselves internally under the new structure and strengthening the foundation of our organization.

How were the company’s results?

Tech Mahindra Profit has fallen by 60 percent to Rs 510.4 crore in the December quarter. The company’s profit was Rs 1,296.6 crore in the last quarter. Whereas in the second quarter of the current financial year it was Rs 493.9 crore. The company’s total operating income fell by 4.6 percent to Rs 13,101 crore in the December quarter, which was Rs 13,734 crore in the same quarter of the last financial year. The company said that there has been a huge decline in its operating profit and the margin has come down from 12 percent to 5.4 percent. The company’s shares closed at Rs 1,407.75, up 3.09 percent on BSE.

However, on quarter-on-quarter basis, the company’s profit in the December quarter has increased from Rs 494 crore to Rs 510 crore. On quarter-on-quarter basis, income in December quarter has increased from Rs 12864 crore to Rs 13101 crore. During this period, the EBIT of the company has increased from Rs 606.6 crore to Rs 703 crore. EBIT margin has increased from 4.7 percent to 5.4 percent. Dollar income has increased from $1555 million to $1573 ​​million.

 

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