Tech Mahindra Q3 Results Review - Margin Expected To Improve In Coming Quarters: IDBI Capital

IDBI Capital Report

Tech Mahindra Ltd. reported 1.1% QoQ growth in Q3 FY24 mainly led by seasonality of Comviva and one time revenues in retail offset by furloughs.

Results were mixed as revenue was above and profit was below expectation.

The Chief Executive Officer is trying to turnaround the company by focusing on revenue and sales improvement, reduced units from 12 to 6.4, focus on top clients and smaller clients, improve sales effort and long term margin improvement.

Considering this we expect revenues to improve from -4.5% YoY in FY24E to 4.6% YoY and 10.1% YoY in FY25E and FY26E.

In addition, we expect margins to improve 206 basis points over FY23-FY26E. Hence, we have revised target price from Rs 1090 to Rs 1,345 (18 times FY26E earnings per share, introducing FY26E estimates).

However, recent run up in price prompt us to maintain 'Hold' rating on the stock.

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