Shares of Tech Mahindra fell more than 6% in Thursday’s trade to the day’s low of Rs 1,320.05 on the NSE following a disappointing set of numbers posted by the company for the December quarter. A couple of top domestic brokerages did not take an optimistic view on the counter, adding to the stock’s woes. Both Kotak Institutional Equities and Nuvama retained their ‘Reduce’ ratings.
Tech Mahindra’s consolidated net profit plunged 61% year-on-year (YoY) to Rs 510 crore and was below an ETNow poll of Rs 590 crore.

Read More: Tech Mahindra Q3 Results: Cons PAT slumps 61% YoY to Rs 510 crore; revenue drops 5%

Here’s what brokerages recommend on the stock:

Kotak Equities: Reduce | Target: 1,330
Tech Mahindra has made the right moves but the turnaround journey will be long, Kotak said in its post-earnings stock review note. The IT major reported healthy revenue growth aided by seasonality and one-offs.

Kotak has retained its ‘Reduce’ rating citing that a sharp increase in stock price has led to full valuations of 20X FY2026E earnings.

“Macro challenges and weak outlook for telecom would hamper the extent of growth recovery in FY2025. Normalized quarterly EBIT margin of 7% will improve but at a slower pace than earlier expectations,” this brokerage said. It added that despite these negatives for near-term numbers, the new CEO was making the right moves in the initial phase of the turnaround journey. The journey will be long but has a decent chance of success, Kotak opined.

Nuvama: Reduce | Target: Rs 1,020
The Q3 earnings were a mixed bag, Nuvama said even as it dubbed Tech Mahindr’s outlook as “uncertain”. Revenue was higher than its estimate of -1% CC QoQ boosted by exceptional revenue, Nuvama said as it noted an EBIT margin of 5.4% to be slightly below the estimate of 5.6%. Lower PAT was due to higher foreign exchange losses with the TCV reported weak at $381 million, down 52% YoY.

“TechM’s weak bookings dwarf the bottoming out of its revenue decline and the potential uptick in margins in the near future. Investors eagerly await the new CEO’s future strategy, to be unveiled in April 2024. We are cutting FY24E/25E/26E EPS by 8.5%/6.9%/1.4% on lower growth/margins,” Nuvama said.

It has maintained a ‘Reduce’ rating and cut the target to Rs 1,020 from Rs 1,050).

(You can now subscribe to our ETMarkets WhatsApp channel)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

(What’s moving Sensex and Nifty Track latest market news, stock tips and expert advice, Budget 2024 News on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

Download The Economic Times News App to get Daily Market Updates & Live Business News.

Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price


Source link