Tech Mahindra shares surge up to 6% as Apr-Jun results beat estimates; analysts say ‘buy’ stock

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July 28, 2020 12:12 PM

Tech Mahindra shares have rallied nearly 50 per cent from March lows of Rs 470.25 apiece. The company informed that it has closed deals of $300 million during the quarter

Tech Mahindra Share price, tech mahindraThe management of Tech Mahindra highlighted that there were impairments on the back of provisions made for COVID-19.

Tech Mahindra share price surged 5.7 per cent to Rs 702.4 apiece on BSE after the company posted a better-than-expected net profit for the quarter ended June 30. Tech Mahindra reported a 21 per cent rise in net profit on a sequential basis. The management of the company highlighted that there were impairments on the back of provisions made for COVID-19. The company reported revenues at Rs 9,106 crore, which is up 5.23 per cent as compared with the year-ago period, but down 4 per cent sequentially. Brokerage firms are upbeat on the stock with an upside up to 15%. “We believe ramping up of large deal won in previous quarters and improvement in deal wins in coming quarters will drive revenues. Further, in the long term, we believe its leadership in the communication vertical will make it a key beneficiary of vendor consolidation in the segment,” ICICI Direct Research said in a report.

The brokerage firm has maintained a ‘buy’ rating to the stock. It will take a jump of 15 per cent for Tech Mahindra to hit the price target of Rs 765 apiece, pegged by the brokerage firm. It further believes that the company will benefit from 5G opportunities and the enterprise segment will also be benefited from improved digital traction, success in large deals.

Climbing off from the day’s high, Tech Mahindra shares were trading 3.06 per cent higher at Rs 684.35 apiece, as compared to a 0.61 per cent rise in the benchmark BSE Sensex. Despite the elongated decision-making cycles, the company hinted at improving the deal pipeline. “Ramp-up in recently won mega deals was largely on track, a key positive,” said Motilal Oswal Financial Services in a report with a target price of Rs 750 and buy rating. ” We believe the sector re-rating is likely to sustain given the phenomenal resilience and adaptability demonstrated during the quarter,” it added.

Tech Mahindra shares have rallied nearly 50 per cent from March lows of Rs 470.25 apiece. The company informed that it has closed deals of $300 million during the quarter, led by the enterprise and communication segments. Tech Mahindra’s CFO Manoj Bhat said three-fourths of the company’s revenue impact came because of issues on the demand side.”Cash generation was strong during the quarter with 5-day drop-in Debtor days, although the company highlighted that it benefitted from some early payments from clients during the quarter,” said Emkay Global Financial Services in a report. The brokerage firm has recommended to buy Tech Mahindra shares with a target price of Rs 720 for 12 months, an 8.5 per upside from yesterday’s close.

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