Shares of Tech Mahindra gained 7% in early trade on Friday, October 16, even as global investment banking firms had mixed views on the stock post its second quarter results.
HSBC had a “buy” rating, while CLSA and Nomura had “hold” and “neutral” recommendations on the Tech Mahindra stock respectively after its September quarter results. Here’s what they said:
HSBC Is Bullish But Sees Limited Upside
HSBC has a “buy” rating and a target price of ₹1,800 per share on Tech Mahindra. This indicates an upside of 9% from its previous close.
The investment banking firm said Tech Mahindra’s second quarter results were slightly better-than-expectations as the company stays on track with the best growth rate among its top-tier peer group.
With its earnings before interest and taxes (EBIT) margin target of 15% achieved, HSBC believes Tech Mahindra is likely to prioritise and sustain growth between 6%-8%.
The company offers strong growth pick-up at reasonable valuation, HSBC added.
CLSA Errs On The Cautious Side
The investment banking firm has a “hold” rating on Tech Mahindra with a target price of ₹1,494 per share. This indicates a downside of 9.5% from its previous close.
CLSA said Tech Mahindra reported a beat across its second quarter revenue, EBIT and profit after tax (PAT) of 0.2%, 2% and 3%, respectively, compared to their estimates.
Its orderbook continued to grow strongly, rising 25% from last year, despite no mega deal wins in the September quarter.
The Tech Mahindra management reiterated its stance of achieving a 15% EBIT margin in FY27 with revenue growth of more than double the industry revenue growth rate. It would like to focus on market share gains without sacrificing margins.
Also, pricing compression in IT services, as per Tech Mahindra, is more due to the intense competition rather than IT service budgets getting squeezed on the back of AI, CLSA added.
Nomura Remains On The Sidelines On Tech Mahindra
The investment banking firm has a “neutral” rating on Tech Mahindra with a target price of ₹1,650 per share, which is the same as its previous closing price.
It said the company’s second quarter earnings were a modest beat. The focus now shifts to longer-term objectives as three-year goals are largely achieved.
The stock currently trades at 18.1 times its FY28 earnings per share estimate of ₹91.2, Nomura added.
Buy Or Sell Tech Mahindra?
Of the 44 analysts who have coverage on Tech Mahindra, 29 have a “buy” rating, 10 have a “hold” rating and five have a “sell” rating.
Shares of Tech Mahindra are now trading 7.1% higher on Friday after the results at ₹1,766.7 . The stock is the only largecap Nifty IT name which is higher on a year-to-date basis, now trading with gains of 7%. Most of its other largecap peers are trading with losses of as high as 20% to 35% for the year.
Tech Mahindra shares are also reacting to the bonus issue announcement, which is the first in 11 years, as well as the board approving an interim dividend for its shareholders.
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