Tech Mahindra Ltd. share price target

Tech Mahindra (TechM) has reported slightly better-than-estimated revenue performance with 0.8% QoQ CC decline, led by traction in BFSI vertical in Q4FY24. It reported TCV growth of 31% QoQ with EBIT margin at 7.4%.

For Q3FY24, Tech Mahindra generated revenue of INR 1,31,013 Mn, showcasing a decline of 4.6% YoY and growth of 1.8% QoQ. This growth was led by one-time revenues in retail and the seasonality effect of Comviva.

Recommendation: Given the uncertainty from the world's largest economies, we expect delays in decision-making on IT budgets. Keeping this in view, we recommend a SELL on the stock.

Tech Mahindra posted revenue of INR 1,28,639.0 Mn, down 2.2% QoQ and 2.0% YoY. This is in accordance with market conditions as pressure on discretionary expenditure continues. According to segment performance on a YoY basis, the following were the results for the quarter: Retail Transport and Logistics (8.2% of revenue) saw a 4.6% decline, Communications Media and Entertainment (CME) (37.0% of revenue) saw a 11.5% decline, Manufacturing (17.8% of revenue) saw a 5.7% growth, Technology (11.0% of revenue) saw a 2.8% increase, BFSI (16.1% of revenue) saw a 6.3% degrowth, and Others (10.0% of revenue) reported a 2.8% decline.

We recently upgraded TechM to BUY from Sell (read our report here link). With that, we now delve into and address key ensuing concerns flagged by investors, essentially: 1) Why do we expect margins to revive from Q1FY25 revenue growth from FY26; 2) What are TechM’s capabilities in BFSI? and what opportunities can it tap into to scale up in this vertical?; 3) What is recently appointed COO Atul Soneja’s track record.