Tech Mahindra Q3 results today: What to expect, how to trade the stock and key things to watch

After a decent set of results from IT heavyweights TCS, Infosys and HCL Tech, investors are eagerly awaiting the quarterly numbers from Tech Mahindra, which will report its earnings today. However, the expectations from the company seem to be modest for the third quarter.
Tech Mahindra may report sequential decline in overall revenue and constant currency revenues, dragged down by the communication and enterprise verticals.

Net profit for the October-December period is likely to rise around 44% quarter-on-quarter.

Here are the key things to track for investors

Margins

Tech Mahindra may see margin expansion up to 330 basis points on a sequential basis, due to reversal of one-offs and operational efficiencies. However, it will be offset to some extent by a decline in revenue.

Deal wins

Deal wins for the third quarter are likely to be muted due to lower working days, weak macro environment and slow decision making. Analysts are expecting the TCV (total contract value) to be in the range of $300-500 mn.

Brokerages take

“We expect TechM’s 3Q revenues to decline by 1.6% QoQ in cc, due to furloughs and continued portfolio optimisation in the Communication vertical,” said Jefferies.

“We expect the company to report revenue growth of 0.5% on a QoQ basis while its margins are likely to expand due to strong growth in
volume and reshuffling of the portfolio,” said Axis Securities.

Segments growth

The communication and enterprise segments are likely to remain under pressure due to lack of discretionary spending and higher furloughs.

Key things to track

Investors will keep a track on deal pipeline, especially in the communication vertical, attrition levels and outlook on growth.

How to trade the stock

Shares of Tech Mahindra were among the better performing IT stocks over the past few months, when the biggies like Infosys and TCS struggled. The stock has returned about 17% in the last six months.

Technically, Emkay says the stock is trading near a weekly resistance.

“Tech Mahindra can be under selling pressure below 1400, while immediate support is at 1300. Long build-up can be seen at this expiry. In the derivatives segment, the OI at $246 mn is elevated. Max call/put is at 1400/1300 strike and call unwinding of 300 lots is at 1400,” it said.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)