Brokerages mixed on Tech Mahindra post Q4 result

NEW DELHI: Brokerages are mixed on Tech Mahindra after the firm reported a 29 per cent fall in March quarter consolidated net profit at Rs 803.9 crore, owing to narrowing of margins due to factors including surge in Covid-19 related costs.

During the quarter, its overall revenues increased 6.72 per cent to Rs 9,490 crore, while the operating margin narrowed by 4 percentage points to 14.2 per cent.

BOB Capital Markets maintained ‘Reduce’ rating on the IT services firm with a target price of Rs 570.

“Tech Mahindra posted a disappointing Q4 operating performance with a hefty miss on revenue and operating margins. The communication vertical had its worst sequential decline since the global financial crisis (GFC). The company continues to underperform peers, revealing a subpar revenue portfolio and operational vulnerability. We crop FY21 and FY22 EPS by 28 per cent and 19 per cent amid Covid-19 volatility,” the brokerage house said.

The scrip traded 7.34 per cent down at Rs 506.20 at around 9.30 am (IST), while BSE Sensex was down 4.23 per cent at 32,290 at around the same time.

On the other hand, Kotak Institutional Equities retained ‘Buy’ call on Tech Mahindra with a revised target price of Rs 630 (earlier Rs 680).

“We bake in the impact of a weak March 2020 quarter and higher-than-expected contraction in revenues of portfolio companies. We now forecast revenue decline of 5.1 per cent in FY2021E as compared to 1.1 per cent earlier in dollar terms.

For the financial year 2019-20, the Mahindra group company reported 6.15 per cent fall in net profit at Rs 4,033 crore.