Tech Mahindra shares trade lower ahead of Q2 earnings

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Tech Mahindra share price traded in the red on October 25 ahead of its September quarter results.

The IT firm will declare its second quarter results today. It is expected to post a revenue growth of around 5 percent on a sequential basis based on the strong growth in Enterprise Segment (ES) driven by digitisation and a pick-up in momentum of 5G deals in Communication Segment (CS). For the company, ES segment contributes 60 percent of the revenues, while the rest comes from the CS business.

Analysts expect the bottomline to remain flat with a marginal rise of 2 percent on an on-quarter basis due to the impact of higher employee costs on margins. The company had given away 75-80 percent wage hikes to its workforce and the cost of lateral hiring will be on a higher side. Attrition rate will also be a key number to watch out for.

The stock was trading at Rs 1,500.20, down Rs 17.80, or 1.17 percent at 09:56 hours. It has touched an intraday high of Rs 1,535.00 and an intraday low of Rs 1,483.45.

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Currently, it is trading 4.81 percent below its 52-week high and 91.78 percent above its 52-week low. Market capitalisation stands at Rs 145,508.14 crore.

Experts expect the TCV of new deals to be in the region of $700 million, which is higher than the quarterly average of $400-500 million. Kotak Institutional Securities expect the deal pipeline to be so strong that will power a robust growth.

EBIT margins are expected to remain flat at 15 percent with most experts predicting a less-than-1 percent improvement. They expect the benefits of higher efficiency to be negated by higher employee costs.

Analysts expect the company to report a PAT in the region of Rs 1,400 crore with an expected increase of around 3 percent. ICICI Direct expects the PAT to improve to Rs 1,398 crore aided by lower tax and higher other income. Kotak and Sharekhan expect PAT of Rs 1,405 crore and Rs 1,408 crore.