Tech Mahindra shares will continue to be in the spotlight on November 2, the day after the company reported quarterly earnings for September.

IT services provider Tech Mahindra reported on Tuesday that consolidated net profit for the quarter ended September 30 fell 4% year-on-year to Rs 1,285 crore, beating analysts’ expectations of Rs 1,224 crore.

Subsequently, the June quarter’s net profit rose 13.6% from Rs 1,131.6 crore. Consolidated operating income for the second quarter of fiscal 2022-23 was Rs 13,129.5 crore, up 3.3% quarter-on-quarter and 20.6% year-on-year. Revenue for the same quarter of the previous fiscal was Rs 10,881.3 crore.

Nomura maintained a “buy” rating on the stock with a target of Rs 1,160 per share, as the second quarter was largely in line with expectations while the outlook was unclear.

Despite layoffs in the second quarter, revenue remained strong and deal win rates remained strong, according to CNBC-TV18.

CLSA maintained its “underperform” label on the stock with a target of Rs 1,070 per share. Margin management remains a challenge, but valuations provide support. CLSA said second-quarter revenue and margins were aligned with expectations, while the near-term outlook was stable. According to CNBC-TV18, find some triggers in the results/comments to attract investor interest.

The stock is reasonably valued at 18.1x/16.2x FY23/FY24 earnings estimates at CMP. Sharekhan remains bullish on Tech Mahindra, given healthy deal wins and reasonable valuations. We maintain our “Buy” rating with an unchanged target price (PT) of Rs 1,220.

Rupee appreciation and/or unfavourable cross-currency movements and/or restrictions on local US talent supply will impact earnings. Additionally, macro headwinds and a possible US recession could slow the pace of technology spending.

While valuations are cheap, they could get even cheaper in the recessionary demand conditions we’re entering.
After Q2FY23, Nirmal Bang maintained the FY24-26 EPS forecast unchanged with a target price (TP) of Rs 889 (12.9x FY24 EPS, multiples maintained, higher than given to TCS multiple discounts of 35%). We maintain our “sell” rating on the stock.