Tech Mahindra Shares Dip 5% Post Q1 Results: Buy, Sell Or Hold?

After declaring poor Q1 results and a huge drop in net profit, the shares of Tech Mahindra opened today on the BSE at a downside gap of 3.85% at Rs 1100.05 apiece from the previous close of Rs 1144.05. In comparison to the previous wrap-up of Rs 1144.05, the stock opened at Rs 1,100.05 and dropped 5.4% to reach an intraday low of Rs 1,082.55.

Tech Mahindra Q1FY24 Results

On July 26, Tech Mahindra released its April-June quarter results for the fiscal 2023-24 year (Q1FY24), indicating a fall of 38% in consolidated net profit to Rs 692.5 crore from Rs 1,131 crore in the same quarter last year. Consolidated revenue from operations for the IT giant in the first quarter of this fiscal year was Rs 13,159 crore, up 3.5% from Rs 12,707 crore during the same period last year. Its EBITDA dropped by 28.8% year on year to Rs 1,338 crore in Q1FY24 from Rs 1,880 crore in Q1FY23.As of June 30, 2023, the firm had 148,297 total employees, a drop of 4,103 from the previous quarter, and INR 7,701 in cash and cash equivalent.

CP Gurnani, Managing Director & Chief Executive Officer, Tech Mahindra, said, "Our results this quarter reflect the uncertainty in the global economy and the IT sector. We are confident that we have the right strategy and the right team to overcome this temporary setback and deliver long term value for our customers and shareholders."

Rohit Anand, Chief Financial Officer, Tech Mahindra, said, "This quarter was a challenging one for us as revenue growth faced strong headwinds and that had an impact on profitability. We have taken swift and decisive actions to address these issues and improve our execution."

Tech Mahindra Share Price Target

Nirav Karkera, Head of Research, Fisdom said, " Tech Mahindra presented soft earnings growth for the quarter with limited reassurance in terms of guidance. The order book remains vulnerable as the TCV continued putting up a weak show through the recent quarter as well. While slump in the communications, media and entertainment segment weighed heavily on earnings, the enterprise segment offered very little respite. Earnings growth potential remains particularly sensitive to developing challenges in terms of global macros, especially the US. One can expect such macro-led headwinds to exert pressure on the sector at large; however, Tech Mahindra exhibits relatively higher sensitivity to such challenges. The business can be expected to undergo significant pressure in the near term with hopes of an imminent uptick in the investment cycle of the communications segment offering limited hope for upside."

" TECHM on the weekly chart has witnessed a whipsaw on its bullish breakout pattern and presently has drifted below the trend line resistance which is placed at 1160 levels. The prices on the daily chart have been entered below their 9, 21 & 50-day exponential moving averages which is a negative sign for the counter. Technically when there is a whipsaw of a consolidation breakout pattern then prices may hit the lower levels of the prices. The counter is weak and any rise in the prices may attract selling interest. The immediate resistance could be placed at 1160 levels and on the lower side prices may drift towards 1060 - 1040 levels," said Nirav Karkera.

Deven Mehata, Equity Research Analyst-Choice Broking said, " Tech Mahindra (TECHM) started the trading session on a bearish note, opening with a 3% gap down at approximately 1111 levels. This put the stock's opening price close to its crucial 200-day Exponential Moving Average (EMA) levels, which currently stand at 1104. Despite the initial setback, TECHM found support in the range of 1060-1080, which has historically proven to be a strong support zone for the stock. Moreover, the stock's recent behaviour indicates a potential bullish momentum, as it successfully retested the higher end of the support range."

"In a promising turn of events, TECHM has managed to climb back above the 200-day EMA levels at 1104, suggesting a potential bounce back. If the stock can maintain its position above these levels and close higher, there is a likelihood of witnessing a rebound to the 1140 level, coinciding with the 50-day EMA. This level might act as the next resistance to watch out for. Over the coming days, the stock is expected to consolidate sideways within the range of 1100-1140 levels. Such a consolidation phase can provide an opportunity for traders to assess the stock's strength and prepare for a potential breakout on either side. The direction of the breakout will likely determine the next significant move for TECHM," said Deven Mehata.

Gaurav Bissa, VP, InCred Equities said, "Tech Mahindra was seen trading in a consolidation phase since September 2022. It witnessed a consolidation breakout above 1165 levels which pushed the stock price to 1265 levels post which the stock witnessed a correction on account of weak numbers from Infosys which pulled the entire IT index down. The stock has witnessed a fresh gap down opening after coming out with weak quarterly numbers and is currently trading in the previous consolidation range with support seen at 990 levels and resistance at 1165 levels. Existing positions can be held onto; however, the stock is likely to witness some more time correction. Traders are advised to exit positions whereas long-term investors should continue to hold as the stock is still comfortably above multiyear trendline breakout levels."

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.