Tech Mahindra shares trade in the red, brokerages keep faith in the stock for long term

Global brokerage firm CLSA has maintained a 'buy' call on the stock and raised the target price to Rs 1,030 from Rs 981 per share

Bucking the trend of strong buying across sectors, shares of Tech Mahindra fell over a percent in intraday trade on BSE on December 16 and traded among few losers in the Sensex index.

Apart from the occasional fall, the stock has been among the top performers in the IT pack.

As of December 15 close, the stock has gained almost 22 percent in the calendar year 2020 so far against a 12 percent rise in the benchmark Sensex.

Most brokerages are positive about the prospects of the company in the medium to long term.

Kotak Institutional Equities, in a report on December 16, said Tech Mahindra has indicated that growth in engineering services business was impacted over the past few years due to factors such as muted demand in the automotive, slowdown of projects in aerospace and delay in 5G rollout.

However, there are several growth opportunities in the next three years, said the brokerage firm.

"The shift towards electric vehicles, connected and autonomous cars provide new opportunities in automotive. Health and medical devices are other verticals with strong growth opportunities. The company noted that except aerospace most other verticals are recovering well in the aftermath of COVID impact," Kotak said.

Kotak has a 'buy' call on the stock with a target price of Rs 1,020.

Global brokerage firm CLSA has maintained a 'buy' call on the stock and raised the target price to Rs 1,030 from Rs 981 per share.

The company had introduced its playbook for addressing the 5G opportunity. It indicated that the market could be close to opening up, CNBC-TV18 reported the research firm as saying.

CLSA sees single-digit revenue growth in communications vertical in FY22 ex-5G. The company planned to improve its EBIT margin to 15 percent by FY22 and the reiteration of its intent to increase its capital return was also a positive. The 5G market opportunity appeared closer to realisation, the research firm added.

Tech Mahindra on October 23 reported a profit of Rs 1,064.6 crore in the quarter ended September 2020, registering a 9.5 percent growth compared to the June quarter.

The profitability was supported by strong operating growth, but the 71.8 percent sequential fall in other income to Rs 117.5 crore restricted growth.

Revenue from operations during the quarter increased 2.9 percent to Rs 9,371.8 crore from Rs 9,106.3 crore in the previous quarter.

The stock traded at Rs 920.65, down 0.69 percent at 1130 hours.

Source - Moneycontrol.com