Tech Mahindra Ltd. shares rose 3% to Rs 1,699.50 on Friday, making it the third-biggest gainer on the Nifty 50 and Sensex, after the IT services company reported higher revenue, profit and operating margins for the September quarter.
Consolidated revenue rose 2.98% sequentially to Rs 16,180 crore in the July-September quarter, while net profit increased 8.22% to Rs 1,585.6 crore. Earnings before interest and taxes rose 5.49% to Rs 2,387.6 crore, taking the Ebit margin to 14.75% from 14.4%, an expansion of 35 basis points.
Revenue growth in constant currency terms stood at 2.4%, compared with 2.6% in the June quarter and above the estimated 1.6%.
Jefferies Upgrades Tech Mahindra, Kotak Raises Target
Jefferies upgraded Tech Mahindra to Hold from Underweight and raised its target price to Rs 1,540 from Rs 1,260, citing an improving growth outlook.
The brokerage raised its earnings-per-share estimates for FY27-29 by 4-6% and expects constant-currency revenue and earnings per share to grow at compound annual rates of 6% and 12%, respectively, over the period. It said a greater focus on growth could limit margin expansion beyond FY27.
Kotak Securities maintained its Buy rating and raised its target price to Rs 1,870 from Rs 1,750. The brokerage cited the company's revenue growth and margin expansion, raised its growth estimates and said opportunities for further margin improvement remained in the medium term.
READ | Tech Mahindra's Q2 Results Impress Jefferies & Kotak, But Citi Still Flags Valuation Concerns
Retail, transport and logistics was the fastest-growing segment, with revenue rising 9.6% sequentially. Communications, Tech Mahindra's largest segment, grew 6%. Manufacturing revenue declined 3.9%, while banking, financial services and insurance revenue increased 0.4%.
The company reported total contract value of $1.02 billion, compared with $1.07 billion in the previous quarter. Deal bookings exceeded $1 billion for the fourth consecutive quarter.
Tech Mahindra Approves 1:1 Bonus Issue
Tech Mahindra's board approved a 1:1 bonus issue, its first since 2015. Shareholders will receive one bonus share for every share held.
On the earnings call, management said the company remained on track to achieve its full-year margin target of 15%. It also said all large deals included an artificial intelligence component and that H-1B visa holders accounted for less than 1% of its workforce. The company does not expect seasonality to affect the December quarter.
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