Macro uncertainties may weigh in the near term of IT services company Tech Mahindra, however, Emkay Global is confident on the company’s medium-term growth prospects. The brokerage has a ‘buy’ call on Tech Mahindra shares for a target price of ₹1,270 apiece, implying upside potential of about 17 per cent in the stock.
“While management anticipates near-term weakness in revenue growth, it is optimistic about its medium-term growth outlook, driven by 5G, cloud, engineering, sustainability, and Industry 4.0,” the financial services company said in its report.
– TechM gave further insights into its NXT.NOW growth strategy, focusing on connectivity, experience, cloud, engineering, and sustainability through differentiated offerings.-
The company also highlighted the progress made on large deals, client mining, and alliances to accelerate revenue growth while driving delivery excellence to steer margin expansion.
The company expects the leadership transition to be smooth as it is a planned succession and executed diligently with a reasonable time period to transition to the new leader and the growth strategy laid out is unlikely to change.
– Management unveiled its plan to focus on building a products and platform business and scaling up the co-creating business.
– The products and platform business is currently at $450 million run rate and has the potential to scale to $1 billion in the next three years.
– Roll forward our target price to Mar-25E EPS and maintain ‘Buy’ with a TP of Rs1,270 (earlier 1,220) at 16x its Mar-25E EPS, considering the anticipated improvement in the margin trajectory, better capital allocation, and reasonable valuation.
– ICICI direct has buy call on Tech Mahindra with a target price of ₹1127 and a buying range between ₹1,110-1,112. The current market price of Tech Mahindra is ₹1109.7.
– The time period mentioned by the analyst is Intra Day when Tech Mahindra price can reach defined target.
– The brokerage recommended to keep stop loss at ₹1099.80.