Tech Mahindra’s shares jumped 4% during the intraday session to reach a 52-week high of Rs 1,761.30. The business announced a 153.1% YoY increase in sales to Rs 1,250 crore for the second quarter, while revenue increased by 3.5% YoY to Rs 13,313 crore.
Profit and revenue increased sequentially by 46.81% and 2.36%, respectively.
The Mahindra Group company announced the quarterly results along with the declaration of an interim dividend of Rs 15 per equity share and the fixing of November 1 as the record date for determining shareholder eligibility.
Although it’s still early, Tech Mahindra’s (TECHM) growth and profitability trajectory have improved. Strong growth in 75% of the portfolio (ex-Manufacturing/Healthcare) helped Q2 growth and margin print come in slightly ahead of projections. The challenge is still steep even though the recovery gradient is following expectations. The decline in BPO margin (which accounts for 16% of revenue and around 12% of operating profit), other expenditure reductions, and flat sub-con expenses were all compensated by the significant increase in IT segmental margin.
According to Motilal Oswal, it is still holding its position because it thinks the current valuation appropriately accounts for the margin and growth concerns. The greater other income in the second quarter, which came from extraordinary gains on the sale of property, is what caused the 8% increase in the FY25 projection (operational estimates remained virtually unchanged). With FY25/FY26/FY27 EBIT margins predicted by the domestic broking firm at 9.2%, 12.7%, and 13.1%, INR PAT is expected to grow at a 20% CAGR over FY24–27.
Over the last two quarters, 1,350TechM has outperformed estimates, which were initially rather modest. Despite the beat, we believe that many macro and micro issues will make the route to achieving its FY27 targets challenging. Nuvama adjusted the EPS for FY25E, FY26E, and FY27E by 3.5%, -0.8%, and 0.4%, in that order.
