On Monday, JPMorgan (NYSE:JPM) updated its assessment of Tech Mahindra Ltd. (TECHM:IN), increasing the price target to INR1,550.00 from the previous INR1,500.00. Despite the price target hike, the firm has maintained an Underweight rating on the stock. The revision follows Tech Mahindra's second-quarter performance, which surpassed expectations in terms of revenue and profit margins.
Tech Mahindra reported a modest revenue growth of 0.7% on a constant currency basis quarter over quarter, while profit margins expanded by 110 basis points to 9.6%. The Telecom sector, a significant segment for Tech Mahindra, showed signs of recovery after five consecutive quarters of decline.
This improvement is seen as a positive development, although the sector still faces challenges. Telecom companies are focusing on cost savings, and discretionary spending continues to be limited.
In other areas, the Manufacturing sector, particularly the Automotive industry, remains subdued due to restricted discretionary spending. Despite these challenges, Tech Mahindra has achieved notable successes, including securing preferred supplier status with several clients in the Financial Services sector. These new relationships are seen as promising for the company's future engagements.
The management of Tech Mahindra has indicated that they expect furlough impacts to be similar to the previous year. However, they also noted that it is still early to make definitive forecasts, with a clearer picture expected to emerge in the next four to six weeks. This cautious outlook reflects the ongoing uncertainties in the global business environment.
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