Tech Mahindra hits 52-week high in weak market
At its analyst meet, Tech Mahindra reiterated that it is focused to drive stronger growth in the Enterprise segment (56.3% of revenue). Also, it expects the communications segment to come back to growth in FY19. It confirmed that it has the strategy and senior management in place and now is focused for execution, analyst at IDBI Capital said in management visit note.
Tech Mahindra articulated its ‘343’ business strategy which focuses on 3 Mega Trends, 4 Big Bets it has taken to cater to these trends and 3 Objectives to achieve the same. This strategy is in place for both the Enterprise and Communications segment, the brokerage firm said in a note with ‘hold’ rating on the stock.
JP Morgan have ‘Neutral’ rating on Tech Mahindra as it believe the company needs to better balance growth with profitability. Its margin performance needs to improve further, even though we are gratified to see the improvement in 2Q FY18.
“On the plus side, Tech Mahindra’s enterprise business (around 53% of FY17 revenues) is on a reasonably solid growth track. Thanks to the impetus to growth from this segment we think Tech Mahindra can register industry-average revenue growth in FY18. More than revenue growth, margin improvement is necessary to regain investor confidence and prompt a P/E re-rating, in our view,” JP Morgan said in a recent report after analyst meet.
“The management reiterated it would strive for above-industry revenue growth and a continuously improving margin trajectory. We forecast 9%/10% revenue/EPS CAGR over FY17-20ii and believe rerating is predicated on higher consistency in revenue growth, which has been an issue in second half of the fiscal in the past, “ analyst at IIFL Institutional Equities said in analyst meet takeaways.
The brokerage firm maintain ‘Add’ rating on the stock with 12-monht target price of Rs 500 per share as the as the recent rally leaves little room for further rerating.
In past five months, the stock rallied 33% as compared to 3% rise in S&P BSE Sensex. At 11:54 AM; it was trading 1.7% higher at Rs 511 on the BSE against 0.28% decline in the benchmark index. A combined 2.21 million shares changed hands on the counter on the NSE and BSE so far.