Tech Mahindra share price falls over 4% despite Q3 profit; should you buy or sell?

By: |
February 01, 2021 10:22 AM

Tech Mahindra share price fell as much as 4.18 per cent to Rs 921.40 apiece on BSE today, even as the IT firm posted a 14.3 per cent rise in its consolidated net profit in the October-December quarter.

Tech Mahindra share priceTech Mahindra's revenue from operations was nearly flat at Rs 9,647.1 crore during the quarter under review from Rs 9,654.6 crore in the year-ago period

Tech Mahindra share price fell as much as 4.18 per cent to Rs 921.40 apiece on BSE today, even as the IT firm posted a 14.3 per cent rise in its consolidated net profit at Rs 1,309.8 crore for the October-December quarter. The company had registered a net profit of Rs 1,145.9 crore in the corresponding quarter of the previous year. Tech Mahindra was the top Sensex laggard today. So far in the intraday session, over 75,000 shares were traded on the BSE, while 16.66 lakh shares exchanged hands on NSE, as per the data from the respective stock exchanges. AR Ramachandran, Co-founder & Trainer, Tips2Trade, told Financial Express Online that even though Q3FY21 results of Tech Mahindra were better than Street expectations, a prevailing bearish sentiment across sectors including Nifty IT is leading to a strong downtrend in Tech Mahindra and other IT stocks.

Also read: Stocks to watch on Budget Day 2021: Maruti, HUL, Britannia, Indian Oil, more; these sectors in focus

Ramachandran also said that technically, 903-855 levels can be used by new investors to re-enter this stock for higher targets in the coming weeks. In January 2021, Tech Mahindra stock fell 1.6 per cent. Tech Mahindra’s revenue from operations was nearly flat at Rs 9,647.1 crore during the quarter under review from Rs 9,654.6 crore in the year-ago period. Analysts at CLSA, are bullish on the stock with a ‘buy’ rating with a revised target price of Rs 1,180 apiece, implying an upside of 23 per cent from the previous close. Visible traction on the 5G opportunity, potential for capital return and a reasonable valuation (16x FY22) kept CLSA constructive on the stock.

Those at Motilal Oswal Financial Services have a ‘neutral’ rating to the stock, with a target price of Rs 1,095, a gain of 14 per cent. Analysts expect Tech Mahindra to deliver double-digit growth in FY22. “However, the extent of the same is likely to be lower than its peers,” they said. The brokerage firm also expects some normalization in the margin, which would lead to a lower P/E multiple. “We value the stock at 16x FY23E EPS, a 40% discount to our target P/E for TCS (Tata Consultancy Services),” the domestic brokerage firm added.

Besides, the firm on Friday informed that the Board of Directors of the company, subject to requisite consents and approvals from jurisdictional NCLTs, approved the Scheme of Merger by Absorption of Tech Mahindra Business Services Limited (TMBSL) and Born Commerce – two wholly-owned subsidiaries – with the company and their respective shareholders.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Soyabean output seen shrinking as Madhya Pradesh farmers shift to paddy
2Weekly auction today: Yields rise as FOMC hints at tapering bond buying
3WGC view: Gold demand may sharply rise once Covid situation normalises