Tech Mahindra Q2 Results Preview: PAT likely to drop 6% sequentially with 70 bps fall in margin

Tech Mahindra is all set to report its financial results for Q2 on October 25. According to Zee Business research, the Pune-based IT company is likely to report a 6.1 per cent sequential fall in consolidated net profit to Rs 650 crore for the July-September period.

Tech Mahindra reported a weak set of results for Q1. | Image: Reuters

Pune-based Tech Mahindra—the country's fifth largest IT company by sales and sixth by market value—is scheduled to report its quarterly results on Wednesday, October 25. Analysts expect the IT major to report a weak set of numbers with a significant fall in margin.

According to Zee Business research, Tech Mahindra is likely to report a 6.1 per cent quarter-on-quarter drop in consolidated net profit to Rs 650 crore for the July-September (Q2 FY24) period. The analysts peg the company's quarterly revenue at Rs 13,125 crore or $1,588 million, marking a decline of 0.3 per cent or 0.8 per cent, respectively.

They peg the company's constant currency revenue to contract 0.8 per cent on a sequential basis.

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Analysts at brokerage Sharekhan, which has a 'reduce' call on Tech Mahindra with a price target of Rs 1,050, are more optimistic about the IT company's revenue in constant currency. They estimate Tech Mahindra to report a sequential drop of 0.3 per cent in constant currency revenue for the September quarter.

The company's earnings before interest and taxes (EBIT), a key measure of operating income, is expected to slide 10.3 per cent sequentially to Rs 800 crore for the second quarter of the current financial year, according to Zee Business research.

Zee Business analysts peg the IT major's margin for the three-month period at 6.1 per cent, a decline of 70 basis points (bps) on a sequential basis.

Sharekhan, however, expects the company's EBIT margin to improve by 210 bps sequentially following a sharp drop in the fiscal first quarter.

Investors will closely look out for the Tech Mahindra management's business outlook, deal pipeline, margin levers, and 5G solutions.

How Tech Mahindra performed in the June quarter (Q1 FY24)

Tech Mahindra began the financial year on a weak note, with a 38.1 per cent sequential fall in consolidated net profit to Rs 692 crore and a 4.1 per cent decline in revenue to Rs 13,159 crore for the April-June period.

Its margin shrank by 280 points sequentially to 6.8 per cent.

According to Zee Business research, Tech Mahindra was expected to report a net profit of Rs 1,100 crore and revenue of Rs 13,450 crore for the fiscal first quarter, with a margin of 10.3 per cent.

Its revenue in constant currency dropped 4.2 per cent on a quarter-on-quarter basis.