Sharekhan has given Buy recommendation for Tech Mahindra with a target price of Rs. 1150 in its research report issued on Apr 26, 2021
Sharekhan’s research report on Tech Mahindra
Q4 revenue missed headline estimates, but continued margin expansion, healthy FCF generation, and stronger deal win TCVs were impressive. Deal TCVs jumped 2.3x on q-o-q. The management guided double-digit revenue growth in FY2022, led by strong deal wins and a healthy deal pipeline. It expects EBIT margin to remain at over 15% despite wage revision, aided by revenue growth and operational efficiencies. We prefer TechM because of a strong growth potential in enterprise segment, 5G opportunities, and scope for margin improvement. We estimate TechM would report USD revenue/earnings CAGR of 10.2%/16.5%, respectively, over FY2021-23E.
Outlook
We maintain a Buy rating on Tech Mahindra (TechM) with an unchanged PT of Rs. 1,150 given improving revenue visibility and reasonable valuation.