Buy Tech Mahindra, target price Rs 630: Kotak Institutional Equities

Kotak Institutional Equities has a buy rating on Tech Mahindra with a target price of Rs 630. Shares of Tech Mahindra ended up 5.34 per cent at Rs 582.45 on Thursday while the BSE Sensex closed 128.84 points down (-0.38 per cent) at 33,980.70.

Tech Mahindra Ltd., incorporated in 1986, has a market cap of Rs 56222.27 crore.

Investment Rationale

BPO margins were in decline even before Covid, said Kotak. Margins will decline further before recovery towards the latter half of the year, it said. Focus on more profitable engagements and tightening of execution can help improve profitability in the medium term, it said.

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 9490.20 crore, down -1.70 per cent from last quarter sales of Rs 9654.60 crore and up 6.72 per cent from last year's same quarter sales of Rs 8892.30 crore. The company reported net profit after tax of Rs 724.90 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 35.9 per cent stake in the company as of March 31, 2020, while FIIs held 37.8 per cent, DIIs 14.4 per cent and public & others 12 per cent.