IIFL has upgraded its rating on Tech Mahindra to buy with a 12-month price target of Rs 635 in its report dated May 27, 2009.
“Stability at Satyam’s client base after a spate of client losses, Anand Mahindra and other senior management meeting with clients to assure them of business continuity and aggressive and quick cost cutting make us believe that odds are turning in favour of Tech Mahindra’s management to effect a turnaround at Satyam. Undoubtedly there are a number of risks and roadblocks on the way for steady growth to begin and potential legal liabilities are unknown. However, we believe the current valuations (including Satyam’s contribution) of <1x EV/sales and 7.5x FY11 p/e already reflect these concerns and risk /reward is in favour of Tech Mahindra. We upgrade Tech Mahindra to a ‘BUY’, based on 7.5x FY12ii EPS, with 12-month price target of Rs 635,” says IIFL’s report.
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