Indian Stock Market

Angel Broking has recommended buy rating on Tech Mahindra with a price target of Rs 1222 in its January 24, 2008 report. “During 3QFY2008, Tech Mahindra recorded a strong 8.1% qoq growth in its consolidated Topline. On a standalone basis, the growth stood at 6.1% qoq. Going ahead, we expect Tech Mahindra to record a 32.6% CAGR growth in Topline and a 106.2% CAGR growth in Bottomline over FY2007-10E. EBITDA Margins to trend downwards and fall to 20% by FY2010E v/s over 25% in FY2007. At the CMP, the stock trades at 8.5x FY2010E EPS. These valuations are fairly attractive and even considering a slowdown or recession in the US, the current consolidation and uncertainty in the global TEM market, Rupee appreciation as also a possible higher tax rate post FY2009, the stock still offers room for upside. We recommend a buy on the stock, with a 12-month target price of Rs1,222. However, given the current negative sentiment towards the sector, stock price out-performance seems unlikely in the short-term and investors will need to be patient if they are considering exposure to the sector, according to Angel Broking report.

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