Sharekhan Recommends Buying Tech Mahindra Stocks: See Valuation And Performance

Reputed brokerage firm Sharekhan recommended buying the stocks of Tech Mahindra, with a target price of Rs. 2,060. Gartner earlier stated, that they are expecting worldwide IT spending to increase by 9.5% Y-o-Y to $4.2 trillion in 2021. That might impact positively Tech Mahindra's growth track.

Target Price

The Current Market Price (CMP) of Tech Mahindra is Rs. 1,785. The brokerage firm, Sharekhan Recommends has estimated a Target Price for the stock at Rs. 2,060. Hence the stock is expected to give a 15.4% return, in a Target Period of 1 year. Sharekhan thinks that the company is well-placed to capture incremental share in 5G, given strong domain knowledge, robust client relationships, and an excellent partner ecosystem.

Stock Outlook
Current Market Price (CMP)	Rs. 1,785
Target Price	Rs. 2,060
1 Year returns	15.40%

Company performance

Tech Mahindra's revenue stood at Rs. 37,855.1 crore in FY 21, which is expected to grow at Rs. 44,400.3 crore in FY 22. The company's Adjusted PAT stood at Rs. 4,478.8 crore in FY 21, which is expected to grow at Rs. 5,641.6 crore in FY22. Hence, Tech Mahindra recorded a 5.4% Y-o-Y growth in the past fiscal, which can grow 26% Y-o-Y in the FY22. However, the brokerage firm is expecting Tech Mahindra's EBIT margin to decline marginally on a q-o-q basis to 15.1% in Q3FY2022 owing to supply-side challenges and higher subcontractor expenses.

Comments by Sharekhan

According to Sharekhan, "Tech Mahindra is expected to report healthy revenue growth with stable margin in Q3FY2022 because of strong growth in the telecom vertical, led by a pick-up in 5G activities, strong demand across key verticals in the enterprise segment, recovery in engineering services, and continued growth in its BPS business."

The report added, "The company has been signing large deal total contract values (TCVs) above its average quarterly deal wins of $400 million-500 million for the past 3 quarters."

About the company

Incorporated in 1986, the company has been providing end-to-end services to telecom OEMs and service providers. Over the years, the company has acquired Comviva Technologies, LCC, and Hutchison Global Services to fill gaps in its service offerings in the telecom space. Notably, post the acquisition of Satyam, TechM entered the enterprise solutions space and became the fifth-largest Indian IT player. The company has now diversified its exposure to other verticals such as BFSI and manufacturing.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

(Also read: Sharekhan Recommends To Buy This Stock For 61% Upside)