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Sensex, Nifty Open Flat; Karnataka Bank Jumps To Three-Year High On Strong Q2

Shares of Tech Mahindra gained after the company’s second quarter revenue increased aided by deal wins.

The stock rose as much as 1.78% during early trading. Total traded quantity is 2.6 times the 30-day average.

Of the 47 analysts tracking the company, 31 maintain ‘buy’, 10 suggest ‘hold’ and six recommend ‘sell’. The return potential of the stock is 5.4%.

The software exporter won deals worth over $716 million in the quarter ended September, compared with $802 million in the previous quarter.

Meanwhile, Tech Mahindra’s weaker-than-expected operating margin in the second quarter could make it harder for the software exporter to clock the exit margin guidance of 14%, according to analysts.

According to Nomura, weak revenue growth and continued margin pressure due to supply side challenges are the key risks. Meanwhile Motilal Oswal expects the company to exit FY23 with EBIT margin of 13.2%, which may make it difficult to deliver meaningful margin recovery in FY24.

Tech Mahindra Q2 FY23 (Consolidated, QoQ)

  • Revenue up 3% at Rs 13,130 crore Vs Rs 12,708 crore (Bloomberg estimate: Rs 13,165.54 crore)

  • Dollar revenue rose 0.3% to $1,638 million.

  • EBIT up 5% at Rs 1,468 crore Vs Rs 1,403.4 crore (Bloomberg estimate: Rs 1,505.50 crore)

  • EBIT margin flat at 11% (Bloomberg estimate: 11.44%)

  • Net profit up 14% at Rs 1,285.4 crore Vs Rs 1,131.6 crore (Bloomberg estimate: Rs 1,202.55 crore)

  • Attrition fell to 20% in Q2 on last 12-month basis.

Source: Bloomberg, Exchange filings, Brokerage notes

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