A day after HCLTech gave a muted revenue guidance of 6-8% for the current fiscal, analysts at JP Morgan on Friday downgraded two Indian IT companies — Tech Mahindra and Mphasis — from neutral to underweight. The brokerage firm highlighted the weaknesses and challenges top Indian IT companies are facing in the BFSI, telecom, hitech, manufacturing and retail verticals.
JP Morgan reduced Tech Mahindra痴 revenue estimates for FY24 and FY25 by 3-5% and those for Mphasisby 6-8%. The brokerage firm said in a note, 展e cut the margins by 40 bps/60 bps, driving 7%/10% cut in EPSfor Tech Mahindra. It also reduced Mphasismargins by 40bps/30bps, driving 8%/9% cut in EPS for FY24 and FY25.
Tech Mahindra, which is yet to announce its FY23 financial results, reported revenue of Rs 44,646 crore for FY22. MphasisFY22 revenue was at Rs 11,961 crore. It also has not announced financial numbers for the previous fiscal.
The brokerage firm reduced the price target (PT) to Rs 900 per share for Tech Mahindra, down by about 10% from the current trading price. For Mphasis, analysts cut the price target to Rs 1,550, around 11% reduction from the current trading price due to lower revenue expectations.
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While Tech Mahindra stocks opened at Rs 1017, falling to the low of Rs 994.55 before closing at Rs 1,021.40 on Friday, Mphasis opened at Rs 1,730, fell to Rs 1,726.15 intra-day before closing at Rs 1,756.80.
The note said clients in the above-mentioned sectors are ramping down, delaying and cancelling projects to cut their discretionary tech spends. Tech Mahindra and Mphasis are likely to be massively impacted by this trend. Around 40% of Tech Mahindra’s business is exposed to telecom, and 10% of the revenue is from hitech. In the case of Mphasis, 62% of its revenue comes from the BFSI segment, while 13% comes from hitech. These troubled verticals are putting growth and margins at risk, JP Morgan said in the note.