An IT Bluechip Stock Gets A Neutral View From Motilal Oswal

A leading brokerage firm, Motilal Oswal has given a neutral view on Tech Mahindra Limited. The stock broking firm attended Tech Mahidra's Investor Day 2023 meet event. Based on the key announcements; change in leadership, due to retirement of Mr Gurnani (CEO) and operational profitability, brokerage firm did the valuation on this IT bluechip company.

According to the brokerage report, "the company has been focusing more on partnering with strategic accounts; its revenue from partners and alliance contributes about 30% to its overall topline, while its threshold stands at 40%. The incremental 10% delta would come from strong traction on Cloud, Hyperscalers, and Cybersecurity. The company is co-creating solutions with multiple Auto OEM partners (Sumitomo is one of them) and is currently generating $20mn from this initiative. There still lies significant scope for scaling up its revenue pie with an additional 15 OEMs."

Tech Mahindra's investment in 5G space has been gaining traction, its annual revenue run-rate from it has reached $1 billion. Motilal Oswal believes that, The traction on 5G is due to three major components: simplifying the network as there is tremendous amount of complexities built into the network, modernizing the tech stack and monetizing 5G for better user experience.

Motilal Oswal states that "Although its current performance remains muted, TECHM's high exposure to the Communications vertical offers a potential opportunity, as a broader 5G rollout can result in a new spending cycle in this space. Near-term growth remains weak and we await greater comfort on margins. We value the stock at 15x FY24E EPS. We maintain our Neutral rating, with a potential downside of upto 6% at target price of Rs 1023 per share."

Tech Mahindra Limited is an Indian multinational information technology services and consulting company. It is a part of the Mahindra Group, founded in 1945, the company is headquartered in Pune and has its registered office in Mumbai.

The company offers innovative and customer-centric digital experiences, enabling enterprises, associates and the society to rise for a more equal world, future readiness, and value creation. It is a USD 6+ billion organization, and is a large cap company. It is focused on leveraging next- generation technologies including 5G, Metaverse, Blockchain, Quantum Computing, Cybersecurity, Artificial Intelligence, and more, to enable end-to-end digital transformation for global customers.

The latest share price of the bluechip IT company is Rs 1090.55, it is up by 5.10 (+0.47%) on intraday basis. Its 52-week high is at Rs 1,574.80 per share and 52-week low is at Rs 944.10 per share.

Disclaimer:
The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.