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Business News/ Industry / Infotech/  Tech Mahindra Q2 Preview: Expect muted set of numbers in seasonally strong quarter; here are the key factors to look out

Tech Mahindra Q2 Preview: Expect muted set of numbers in seasonally strong quarter; here are the key factors to look out

Tech Mahindra Q2 results to be announced on October 25, interim dividend recommendation for FY2023-2024. Expectations of soft Q2 for Tech Mahindra with drop in revenue and margins.

Tech Mahindra share price ended 1.32% down at ₹1,155.15 apiece on BSE. (Bloomberg)Premium
Tech Mahindra share price ended 1.32% down at 1,155.15 apiece on BSE. (Bloomberg)

Tech Mahindra Q2 Preview: Pune-based IT major, Tech Mahindra Ltd, will report its Q2 results on Wednesday, October 25. For the fiscal year 2023–2024, the board of directors will also take into consider a recommendation for the interim dividend payment. The record date to determine the members eligible to receive the interim dividend, if approved by the board, is set by the company for Thursday, November 2.

So far major Indian IT companies, such as TCS, Infosys, HCL Tech, and Wipro, have announced muted earnings for the July–September quarter (Q2) on the backdrop of ongoing macroeconomic worries. Although the second quarter is usually a strong one for this sector, 2QFY24 was expected by the street to be sluggish since discretionary expenditure has been hindered amid macroeconomic uncertainties.

Also Read: Tech Mahindra Q1 Results: Headcount plunges 9% by 4,103 in June quarter

"While the industry has witnessed an uptick in order inflow over the past two months with a focus on cost efficiency, the slowdown in project-based business is expected to hamper overall industry growth," said brokerage Motilal Oswal Financial Services in its report.

Similarly, most of the brokerages expect a soft Q2 for Tech Mahindra with a sequentially drop in revenue and margins. Tech Mahindra share price ended 1.32% down at 1,155.15 apiece on BSE

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Here's what the brokerages have to say before Tech Mahindra's Q2 results:

Motilal Oswal Financial Services

As the Communications, Media & Entertainment (CME) sector continues to face pressure, the brokerage predicts that revenue will drop even more after declining in 1QFY24. Revenue for the second quarter of FY24 should decrease by 1.1% QoQ in constant currency (CC).

Hiring is expected to remain muted. Large one-offs are expected in margins. Margin adjustments need to hold steady. Deal wins are anticipated to be subdued in 2QFY24, just like in 1QFY24.

Also Read: Q2 results review: Major players report soft earnings; what's the road ahead for IT sector?

Axis Securities 

The brokerage anticipates that the company will report a 0.1% QoQ decline in revenue, with margins likely to hold steady during the quarter. Key monitorables to watch out are a) Deal TCVs and pipeline from the communication vertical; b) Pricing situation; c) Attrition; d) Growth/margins/DSO day outlook; and e) 5G rollout commentary.

InCred Equities 

The brokerage believes that revenue will be impacted by slowdown in the corporate and telecom sectors. Telecom vertical is probably levelling off. Reduced revenue, senior employees' residual compensation increases, and possibly one-time contingencies that affect EBIT margins. EBIT's sequential fall will affect PAT.

KRChoksey Shares and Securities 

"Tech Mahindra Ltd is expected to report revenue growth of 11.42% on a YoY basis an 11.17%, sequentially. The EBIT is expected to witness sharp upside of 50.32% sequentially and decline of 8.72% on a YoY basis. At the same time, the EBIT margin is expected to see contraction of 200 bps YoY and on a sequential basis it will see improvement of 24 bps. Net profit is anticipated to grow by 40.3% on a sequential basis and decline of 10.05% on a YoY basis.

Despite the short term uncertainty persisting, management remains optimistic about the long term growth and anticipates deal wins to rebound going ahead," the brokerage said in its report. 

Also Read: Tech Mahindra to sell its 30% stake in Avion Networks for $50,000

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.


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Published: 24 Oct 2023, 03:25 PM IST
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