Most brokerages bullish on TechM even as Q4 net falls

Several brokerages maintained buy rating on Tech Mahindra even as the company reported a fall in net profit in the quarter ended March.

Antique Stock Broking, Jefferies and Reliance Securities maintained buy rating while Credit Suisse and CLSA retained their outperform rating.

Shares of Tech Mahindra slipped 3 per cent to Rs 750 and hit an over threemonth low during the session as fourth quarter profit missed estimates. The company’s consolidated net profit fell 7.3 per cent year-on-year to Rs 1,132.50 crore in the March quarter.

CLSA said it is maintaining outperform rating on improved demand environment.

“Tech Mahindra has seen a sustained recovery in its telecom business, which has seen growth for three consecutive quarters, even as the enterprise business has softened somewhat. Improved demand, particularly in telecom, underpinned by rising deal wins could drive a growth recovery with modest margin expansion,” said CLSA.

Jefferies has cut earnings estimates for FY20 and FY21 slightly to reflect slightly weaker growth and margins, and lower revenue base of FY19. However, it has maintained buy rating citing attractive risk reward.

HDFC Securities has downgraded the stock to ‘sell’ from buy following the weak fourth quarter result and slashed target price to Rs 652.

“Revenue growth will be muted in both telecom and enterprise segment. Margin is near peak level and will contract with wage hikes,” said HDFC Securities.