Tech Mahindra hits 52-week high in weak market

STOCK MARKET - Tech Mahindra hit a 52-week high of Rs 517 on the BSE in intra-day trade in an otherwise weak market. In past seven trading sessions, the stock of IT consulting & software firm outperformed the market by gaining 11% from Rs 466 on December 5, after Tech Mahindra announced to hold analyst meet on December 8 to make presentations on the Company’s strategy and provide business updates. On comparison, the S&P BSE Sensex was up 0.42% during the same period.

At its analyst meet, Tech Mahindra reiterated that it is focused to drive stronger growth in the Enterprise segment (56.3% of revenue). Also, it expects the communications segment to come back to growth in FY19. It confirmed that it has the strategy and senior management in place and now is focused for execution, analyst at IDBI Capital said in management visit note.

Tech Mahindra articulated its ‘343’ business strategy which focuses on 3 Mega Trends, 4 Big Bets it has taken to cater to these trends and 3 Objectives to achieve the same. This strategy is in place for both the Enterprise and Communications segment, the brokerage firm said in a note with ‘hold’ rating on the stock.

JP Morgan have ‘Neutral’ rating on Tech Mahindra as it believe the company needs to better balance growth with profitability. Its margin performance needs to improve further, even though we are gratified to see the improvement in 2Q FY18.

“On the plus side, Tech Mahindra’s enterprise business (around 53% of FY17 revenues) is on a reasonably solid growth track. Thanks to the impetus to growth from this segment we think Tech Mahindra can register industry-average revenue growth in FY18. More than revenue growth, margin improvement is necessary to regain investor confidence and prompt a P/E re-rating, in our view,” JP Morgan said in a recent report after analyst meet.