NEW DELHI: Shares of Tech Mahindra were trading higher in early trade on Wednesday after it posted a 5.6 per cent rise in consolidated net profit at Rs 1,124 crore for the September quarter.
The IT firm had registered a net profit of Rs 1,064.3 crore in the July-September 2018 quarter.The scrip was trading 0.76 per cent up at Rs 779.55 at around 9.35 am (IST), while the benchmark BSE Sensex was down 71 points, or 0.18 per cent, at 40,177 at around the same time.Brokerage firm Nirmal Bang maintained Sell call on Tech Mahindra with a target price of Rs 575 post Q2 earnings.
However, it added that Tech Mahindra has presented a good set of numbers for Q2FY20 with a constant currency (CC) revenue growth of 4.1 per cent QoQ.Post Q2FY20, we have tweaked our revenue and margin estimates upwards (for FY20/FY21/FY22) but still remain below the company guidance on the latter, Nirmal Bang said in a report.Tech Mahindra also said it received a tax refund in the September 2019 quarter - which is a one-time event that lowered its effective tax rate, and therefore, increased its net profit.During the quarter, the company signed a multi-year agreement with AT-T to expand strategic collaboration accelerating the latter's IT network transformation, shared services modernisation and movement to the cloud.On the other hand, Edelweiss Securities has Buy call on Tech Mahindra with a target price of Rs 937.
Highest-ever deal-wins with a TCV of $1.5bn and a healthy deal pipeline portend an excellent FY20 for the company.
While operational efficiencies to the tune of 100 bps helped Tech Mahindra expand margins in Q2FY20, we estimate FY20 margins (YoY) would dip owing to deal ramp-ups in H2FY20, which the company should recoup over FY21E.
The stock is trading at an attractive 15x FY20E EPS, Edelweiss said.