Tech Mahindra stock: Down 28 % from 52-week high! Is it time to buy the dip in this large-cap IT stock?

Shares of Tech Mahindra are in focus after the firm announced the appointment of Mohit Joshi as its new managing director and chief executive officer. The large-cap IT firm stock hit a 52-week high of Rs 1,574.80 on March 25, 2022, and is currently down over 28 per cent from its high. However, it has recovered over 20 per cent from its 52-week low of Rs 944.10.

At 11:15 hours, the stock was trading 2.51 per cent lower at Rs 1105.20 on the Bombay Stock Exchange. The market cap of the firm fell to Rs 1,07,647 crore.

Sumit Pokharna of Kotak Securities believes that Mohit has the right credentials to drive consistent revenue growth and profitability. He has a strong foundation across multiple facets of the business viz—domain, technology, sales and marketing processes, large deals, etc.

“Tech Mahindra has many building blocks in place namely scale, reasonable breadth of capabilities, leadership in the telecom vertical and a good presence in manufacturing. It can do with better discipline in deal pursuits, execution and a higher emphasis on the build over-buy decisions,” Pokharna added.

He believes Margin improvement and its sustainability is the key to re-rating, going forward and is bullish on Tech Mahindra as the stock trades at inexpensive valuations. “Long-term investors can BUY the stock with a target price of Rs1,240,” he said.

However, ICICI Securities continues to maintain a ‘Reduce’ rating on Tech Mahindra as it believes the company has room for improving its digital capabilities (Table 1) and in order to revive growth it will have to invest in building digital capabilities.

Additionally, Tech Mahindra’s wallet share in top-5 clients has been reducing for the past four quarters and the brokerage believes this is likely to continue over the next two quarters as well due to an increased level of automation and cost-reduction programmes undertaken by these clients.

Sharekhan expects the outlook for FY24 to be uncertain as highlighted by the company due to concerns about delays in decision-making on account of global headwinds with the possibility of slow gradual recovery.

However, it has a ‘Buy’ rating on the stock with a target price of Rs 1220 given the industry-leading growth in BPS business, stable to a healthy outlook on its verticals and scope for margin improvement. “We advise investors to adopt a staggered approach to invest from a long-term perspective,” it said.

Tech Mahindra on Technical charts

According to Vaishali Parekh, Vice President – Technical Research, Prabhudas Lilladher, Tech Mahindra witnessed a huge gap up opening and resistance near the previous peak zone of Rs 1,164 levels witnessing some profit booking. The RSI has a pullback and is well-placed indicating strength. With the near-term support remaining at Rs 1,065 zone, the stock can move further up if a decisive breach above Rs 1,165 is registered anticipating for next target of Rs 1,280 levels.

Also read: YES Bank, Tech Mahindra, Tata Consumer: How should you trade these stocks amid weak markets

Tech Mahindra’s Q3 Performance

Tech Mahindra reported a fall in third-quarter profit, hurt by a moderation in demand and subdued performance at its communications division. The company’s consolidated net profit fell 5.3 per cent to Rs 1,297 crore for the quarter ending December 31, 2022, as against Rs 1,369 crore in the year-ago period.

Revenue for the quarter came in at Rs 13,735 crore, up 19.9 per cent YoY, the IT major said in a release.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)