Tech Mahindra - Turnaround Around The Corner; Upgrade To ‘Buy’: ICICI Securities

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..ICICI Securities Report.We believe, Ebit margin improvement is a low hanging fruit for Tech Mahindra Ltd.’s new Chief Executive Officer Mr. Mohit Joshi; however, top line revival may take some time. That said, Mr Joshi’s opening gambit (appointment of COO Mr. Atul Soneja and an internal reshuffle) bolsters our conviction for a successful turnaround. On balance, we also take cognizance that this is contingent on improving capabilities and filling white spaces in non-communication verticals, which should start reflecting in deal wins and market share gains. Tech Mahindra’s valuation looks stretched on consensus’ estimates. But, Mr. Joshi’s initiatives playing out could form a strong premise for the stock to re-rate structurally. Given the backdrop, we increase our target multiple to 20 times (earlier: 14 times) and upgrade Tech Mahindra to ‘Buy’. Tech Mahindra (28%) has outperformed Nifty IT (17%) on a year-to-date basis despite showing weak results over the past three quarters. From our recent discussion with Tech Mahindra management, we believe that Ebit margin can improve to ~15– 16%, i.e. by ~500–600 bps over FY24-26 versus street’s estimate of 13.2% in FY26. However, mired by soft demand in the telecom vertical and weaker capabilities in other verticals, top line revival will take some time. We assume 10%/13.3% YoY constant currency revenue growth for FY25E/26E. Our earnings per share estimate increase of 10%/24% rides largely on the back of stronger ~200/300 bps FY25/26 Ebit margin boost..Click on the attachment to read the full report:.Hindalco - Capex, Shift To High Value-Added Downstream Products To Drive Profitability: Motilal Oswal.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Tech Mahindra - Turnaround Around The Corner; Upgrade To ‘Buy’: ICICI Securities

Low hanging fruits around margins.

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