- Tech Mahindra’s Q3FY24 meets street expectations, but concerns arise from a demand slowdown.
- Stock experiences a notable 31% surge in the last 12 months, outperforming Nifty IT index.
- Nomura maintains ‘buy,’ sets Rs 1,470 target; awaits new CEO Mohit Joshi’s turnaround plan in April 2024.
- CEO Joshi’s restructuring focuses on sales, profit margins, and internal culture.
- Q3 sees a 60% YoY decline in net profit, with concerns about sluggish demand in key verticals.
- HSBC remains skeptical, issues ‘hold’ call with a Rs 1,300 target, citing margin improvement challenges.
- Morgan Stanley raises target to Rs 1,220, views Q3 as potential performance bottoming but stays ‘underweight.’
- Analysts emphasize the market’s anticipation of Joshi’s strategy and potential revisions to consensus estimates.
Tech Mahindra Introduction :
Tech Mahindra’s recent Q3FY24 performance has sparked debate among market participants, raising concerns about the company’s future prospects. Despite matching street expectations, concerns remain about near-term issues caused by a demand slowdown in a severe macroeconomic environment. This blog looks at the important features of Tech Mahindra’s performance and the market’s expectations for the newly appointed CEO, Mohit Joshi’s recovery strategy.
Stock Surge and Market Outperformance :
Tech Mahindra’s stock has skyrocketed in the last year, up more than 31%. This outperformance exceeds the modest 23 percent increase shown in the broader Nifty IT index during the same time period.
Analyst Views and Target Price Calls :
Nomura analysts maintain a ‘buy’ recommendation on Tech Mahindra and set a target price of Rs 1,470 per share. They praise the Q3 financials, which exceeded growth projections while margins remained consistent. The spotlight has now shifted to the much-anticipated turnaround strategy, which CEO Mohit Joshi is due to present in April 2024.
Joshi’s Restructuring Game Plan :
CEO Mohit Joshi, who took complete charge on January 1, 2024, has carried out a significant reorganisation strategy. This strategy focuses on three key areas: boosting sales performance, increasing profit margins, and transforming the internal organisational culture. Joshi intends to lead the corporation through a transformational period, following in the footsteps of his predecessor, CP Gurnani.
Financial Snapshot and Concerns :
Tech Mahindra encountered challenges in Q3FY24, with net profit falling by 60% YoY to Rs 510 crore. The slowdown was compounded by weak demand in critical industries such as high-tech, telecom, and financial services. Net profit fell 41 percent YoY at Rs 763 crore. Analysts at HSBC were sceptical, issuing a ‘hold’ call with a target price of Rs 1,300 per share. They emphasised the need of margin expansion being dependent on factors such as pyramid improvement or a price increase.
Morgan Stanley’s viewpoint :
Morgan Stanley has raised its target price for Tech Mahindra to Rs 1,220 per share, but it remains ‘underweight’. They believe that Q3 could be the bottom of the company’s performance and see it as a possible turnaround story in the medium run. However, they warn of possibly substantial negative adjustments to consensus projections in the near future.
Conclusion :
Analysts have expressed varying perspectives about Tech Mahindra’s Q3 performance, with a focus on CEO Mohit Joshi’s turnaround strategy. Investors are eager for details on the company’s future orientation under the new leadership. As the market digests the emerging story, choices to buy, sell, or retain Tech Mahindra stock will likely be based on the effectiveness of Joshi’s restructuring attempts and the company’s ability to navigate the current economic headwinds.