Tech Mahindra shares turn positive for 2024 after double upgrade from Morgan Stanley

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage firm Morgan Stanley has double upgraded Tech Mahindra to “overweight” from its earlier rating of “underweight.” The brokerage has also raised its price target on the stock to ₹1,490 to ₹1,190.

Morgan Stanley believes that Tech Mahindra’s medium-term outlook on growth, margins and capital allocation should lay a floor for the stock at ₹1,150.

Tech Mahindra, in its post earnings call highlighted that financial year 2025 will be a better year compared to 2024. It has also guided for industry-leading growth in three years and EBIT margin of 15% from the current 7% by financial year 2027.

The brokerage called Tech Mahindra a “self-help story” citing the management’s tangible and quantifiable outlook for financial year 2027.

It sees a sequential improvement in margins, revenue growth to improve from last year, and a diversification from the Telecom vertical as some key catalysts for Tech Mahindra.

However, CEO Mohit Joshi said that the telecom business remains the heart of the Tech Mahindra story and the company has no plans to downplay the vertical.

Out of the 46 analysts that have coverage on Tech Mahindra, 20 of them have a “buy” recommendation, 11 say “hold,” while 15 of them have a “sell” recommendation.

Shares of Tech Mahindra turned out to be the top gainers on the Nifty 50 on Friday, ending 7.5% higher at ₹1,280. The stock has turned positive for 2024 after Monday’s 2.5% advance.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow