Tech Mahindra at new high, rallies 7% on healthy September quarter numbers

Shares of Tech Mahindra hit a new high at Rs 1,629.40, and have rallied 7 per cent on the BSE in Tuesday’s intra-day trade after information technology (IT) firm reported a good set of numbers for the quarter ended September 2021 (Q2FY22).

The stock surpassed its previous high of Rs 1,575.95 touched on October 20, 2021. In the past three months, the stock has outperformed the market by surging 45 per cent, as compared to 16 per cent rise in the S&P BSE Sensex.

In Q2FY22, Tech Mahindra’s revenues increased 7.2 per cent quarter on quarter (QoQ) in constant currency (CC) terms, while they were up 6.4 per cent in dollar terms, mainly led by 7.7 per cent QoQ growth in communications while Enterprise revenues grew 7.0 per cent QoQ in CC terms.

In rupee terms, the company reported net profit at Rs 1,339 crore up 25.8 per cent year-on- year (YoY), but down 1.1 per cent sequentially. Profits were impacted by higher tax rates in other geographies. The revenue for the quarter grew 16.1 per cent YoY at Rs 10,881 crore. Revenue was up 6.7 per cent sequentially. Earnings before interest tax (EBIT) margin was flat QoQ at 15.2 per cent despite cost pressures due tailwinds coming in from operating efficiency .

The total contract value (TCV) for the quarter came in at $750 million. Of this, $455 million deals were signed in the communications, media and entertainment (CME) segment and $495 million came from enterprises. Operating margins for the quarter came in at 15.2 per cent. The company also declared special dividend of Rs 15 per equity share of Rs 5 face value.

“The company maintained its guidance of double digit organic revenue growth for FY22 and 15 per cent EBIT margin. The revenue growth in coming quarters will continues to drive from its communication vertical ( as operators across the globe will continue to spend on areas around 5G and additional levers are coming from 5G for enterprises,” ICICI Securities said in a note.

“We continue to stay on the sidelines on Tech Mahnidra, as we see its strong business performance balanced with elevated operational risks in a supply constrained environment. While commentary on 5G remains upbeat, we await further clarity on the sustained impact of 5G spend on growth, given the repurposing of budgets in 5G, which should taper down the momentum unlike previous cycles,” Motilal Oswal Securities said in result update.