Tech Mahindra Q4 result preview: Profit, revenue may shrink YoY; updated on CME vertical, leadership to be in focus

Tech Mahindra Q4 result preview: Tech Mahindra is all set to declare its March quarter result on Thursday, April 25. The IT firm's revenue growth may remain muted, and profit numbers could fall year-on-year. However, Tech Mahindra is expected to report a sequential rise in profit numbers due to the low base of the last quarter.

The IT player had reported a 61 per cent year-on-year fall in net profits and a 4 per cent year-on-year decline in revenue from operations in Q3FY24.

Experts believe weakness in the CME (communications, media and entertainment) vertical, which contributes nearly 37 per cent of sales, will continue to drag the company's growth.

Also Read: Q4 results today: Bajaj Finance, IndusInd Bank, Tech Mahindra among 38 companies to report Q4 earnings on April 25

Apart from key numbers, the outlook on the growth and margin in the CME vertical, updates on business rationalisation exercises, BFSI contribution, leadership changes and the timing and extent of salary hikes are expected to be in focus.

Brokerage firm Nirmal Bang expects Tech Mahindra to report a 4.5 per cent year-on-year (YoY) fall in Q4FY24 revenue. Quarter-on-quarter (QoQ), revenue may come flat.

Tech Mahindra is poised for a significant surge in its fourth-quarter profit after tax (PAT), with estimates from Nirmal Bang indicating a potential leap of nearly 77 per cent quarter-on-quarter. However, year-on-year, the brokerage firm's estimates suggest a decline of 19.2 per cent.

EBIT may fall 28 per cent YoY but rise 57 per cent QoQ, while EBIT margin may rise by 140bps QoQ to 8.4 per cent in Q4FY24, said the brokerage firm.

Also Read: Meta Q1 Results: Facebook parent more than doubles profit to $12.37 billion, revenue up 27% to $36.46 billion

Nirmal Bang believes, there may be some impact of the business rationalisation exercise continuing in Q4FY24. It had a 120bps impact on margins in Q3FY24.

Overall, Nirmal Bang expects TCV (total contract value) to be higher than the Q3FY24 TCV of $381 million.

"We think the new organisational set-up is just falling in place, and we think under Mohit Joshi, Tech Mahindra will be much more selective in bidding for large deals. The TCV has been falling outside Tech Mahindra’s guided range of $700-1,000 million for the past four to five quarters, and now, with the new management and strategy in place, we believe it will gradually move within the guided range," said Nirmal Bang.

The estimates of Motilal Oswal show Tech Mahindra may report a 3.5 per cent YoY fall in revenue and a nearly 31 per cent YoY drop in adjusted PAT. Sequentially, revenue may remain flat but the adjusted PAT can rise 29 per cent.

"Revenue growth is expected to be muted at 0.7 per cent QoQ CC (constant currency) due to weakness in both CME and enterprise verticals. Margins are likely to improve 140bp QoQ, as the impact of cost-control efforts should start becoming visible. Weak growth is likely to keep margins under pressure," said Motilal Oswal.

The brokerage firm believes Tech Mahindra will report muted deal wins for the quarter due to macro uncertainty. It expects to deal TCV of $500 million in Q4FY24.

Tech Mahindra share price declined a little over 2 per cent during Q4FY24 against a 2 per cent gain in benchmark Sensex.

On Thursday, April 25, Tech Mahindra share price opened slightly lower at ₹1,181.25 apiece against the previous close of ₹1,186.10 on BSE.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.