Tech Mahindra Q1 Results Review - Weakness In Communication Business To Impact Growth: IDBI Capital

IDBI Capital Report

Tech Mahindra Ltd. reported subdued revenue growth in Q1 FY24 (down 4% QoQ) due bankruptcy of one client (0.4%), decline in communication business and seasonality (Comviva).

Going forward, we expect Tech Mahindra to report subdued revenue growth in FY24E mainly led by softness in communication, delay in decision making and deal conversion and backended growth assumptions.

This coupled poor margin performance in Q1 (led by one off provision of ~32 million and wage hikes) prompt us to revise our earnings per share estimates downwards by 26% for FY24E and 8% for FY25E.

Despite this considering the credential of new Chief Executive Officer and expectation of turnaround has prompted us to maintain 'Hold' rating on the stock with a revised target price of Rs 1,095 (16 times FY25E EPS).

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