Motilal Oswal has given Neutral recommendation for Tech Mahindra with a target price of Rs. 1600 in its research report issued on Feb 01, 2022

Motilal Oswal’s research report on Tech Mahindra

Tech Mahindra (TechM)’s 3QFY22 USD revenue growth at 4.7% QoQ CC (organic growth at 4.0% QoQ CC) was 100bps above our estimates. It was driven by yet another quarter of strong performance from BPO (9.7% QoQ / 35.3% YoY), while IT Services was impacted by furloughs (up 2.0% QoQ, ex-acquisitions). Vertical growth was led by Comm. (+6.9% QoQ CC), while Enterprise (3.2% QoQ CC) was modest. New deal wins at USD704m (down 6% QoQ) have stayed in a narrow range in recent quarters. Although, the management continues to see sustained traction in the deal momentum. – Excluding one-off gains, the 3Q EBIT margin dipped 120bps QoQ to 14.0% v/s our expectation of 15.1% on higher subcontracting expenses (+12% QoQ), employee-related interventions, and lower utilization (-300bps QoQ to 86%). TechM added a modest 3.9k in 3Q after an all-time high net addition of 15k employees in 2Q.


We continue to stay on the sidelines on TechM as we see stronger business performance as balanced by elevated operational risks in a supply-constrained environment. We reduce our EPS estimates by 3–4% for FY22E/FY23E post the 3Q miss. Our TP implies 19x FY24E EPS. We remain Neutral on the stock.

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At 17:30 Tech Mahindra was quoting at Rs 1,455.05, down Rs 27.70, or 1.87 percent.

It has touched an intraday high of Rs 1,483.05 and an intraday low of Rs 1,449.90.

It was trading with volumes of 89,921 shares, compared to its thirty day average of 149,781 shares, a decrease of -39.97 percent.

In the previous trading session, the share closed down 1.61 percent or Rs 24.30 at Rs 1,482.75.

The share touched its 52-week high Rs 1,837.75 and 52-week low Rs 915.05 on 30 December, 2021 and 26 February, 2021, respectively.

Currently, it is trading 20.82 percent below its 52-week high and 59.01 percent above its 52-week low.

Market capitalisation stands at Rs 141,280.88 crore.

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