CLSA mentioned that Tech Mahindra is already seeing an expansion in its EBIT margin; Key points for investors
Shares of IT major Tech Mahindra rallied 4.2 per cent to a day’s high of Rs 1,642.20 on the BSE after the global brokerage firm CLSA upgraded the stock to an ‘Outperform’ rating from an earlier ‘Hold,’ with a target price of Rs 1,749 per share.
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In its note, CLSA mentioned that Tech Mahindra is already seeing an expansion in its EBIT margin, with the next key milestone being the order book.
However, a broad-based growth revival for Tech Mahindra is not expected until FY26.
The financial services, healthcare, and manufacturing sectors are expected to drive the majority of this growth.
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CLSA views the company’s EBIT margin target of 15 per cent by FY27 as achievable and not overly ambitious, noting that the recent upward trend in EBIT margins provides scope for further rerating.
Last month, Citi had assigned a ‘Sell’ recommendation on Tech Mahindra, with a price target of Rs 1,260 per share. Citi said the IT stock’s growth is still difficult in the current environment.
Out of the 44 analysts that have coverage on Tech Mahindra, 18 of them have a ‘Buy’ rating, 11 of them say ‘Hold’, while 15 have a ‘Sell’ call. The consensus implies a potential downside of about 4 per cent from the current levels.
Since May 2023, the stock has been on an upward trajectory, making higher highs and higher lows.
Shares of Tech Mahindra Ltd. closed 1.94 per cent lower at Rs 1,578 on Monday. The stock has risen nearly 22 per cent so far in 2024, while it has surged 30 per cent over the last 12 months.
