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Tech Mahindra shares zoom 9% after strong Q3 results; should you buy or sell shares?

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Shares of India’s major IT firm Tech Mahindra rallied on Wednesday, after the firm reported strong Q3 results. Tech Mahindra shares closed 8.5% higher on BSE at Rs 814. Tech Mahindra has reported a 13% sequential rise in Q3 profit to Rs 1,203 crore. Notably, the consolidated net profit jumped 27.5% on-year. The firm’s revenue rose 3.6% on quarter to Rs 8,944 crore. In theOctober-December period the software exporter won a key contract from one of the largest banks in the ANZ region for digital channel integration across core banking processes and asset finance.

Taking stock of the reported results, global brokerage firm Credit Suisse has maintained an ‘Outperform’ rating on the shares with a target stock price of Rs 950. The firm noted that the telecom story has started panning out. According to Credit Suisse, Tech Mahindra is a well-placed stock despite good performance. The valuations are reasonable at the current levels, noted Credit Suisse.

Also read: Share Market Highlights: Sensex ends 385 points higher, Nifty above 11,050; Tech Mahindra, Zee Entertainment rally

Apart from Credit Suisse, brokerage firm CLSA too maintained Outperform call on Tech Mahindra revising the target price upwards to Rs 810, from Rs 720 earlier. Notably, CLSA hiked revenue estimates for the IT firm by 1-3% and margin estimates by 75-130 basis points.

Edelweiss Securities raised the target stock price to Rs 1,002, saying that the firm’s telecom business that the telecom vertical before 5G spends kicking in enhances Tech Mahindra s long-term growth prospects. While enterprise business looks solid with industry-leading revenue growth, turnaround in telecom is getting stronger with each quarter. At current market price, the stock is trading at an attractive 13.6x FY20E EPS. We maintain Buy with revised target price of Rs 1,002, the brokerage house said.