TECHM - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.6
| Stock Code | TECHM | Market Cap | 1,39,403 Cr. | Current Price | 1,423 ₹ | High / Low | 1,854 ₹ |
| Stock P/E | 34.5 | Book Value | 222 ₹ | Dividend Yield | 3.59 % | ROCE | 24.3 % |
| ROE | 18.3 % | Face Value | 5.00 ₹ | DMA 50 | 1,440 ₹ | DMA 200 | 1,492 ₹ |
| Chg in FII Hold | 0.65 % | Chg in DII Hold | -0.45 % | PAT Qtr | 541 Cr. | PAT Prev Qtr | 1,139 Cr. |
| RSI | 48.9 | MACD | -4.92 | Volume | 6,88,932 | Avg Vol 1Wk | 34,87,818 |
| Low price | 1,304 ₹ | High price | 1,854 ₹ | PEG Ratio | 15.3 | Debt to equity | 0.07 |
| 52w Index | 21.6 % | Qtr Profit Var | -23.8 % | EPS | 39.4 ₹ | Industry PE | 20.7 |
📊 Core Financials
Revenue Growth: Stable but showing quarterly profit decline (PAT Qtr: ₹541 Cr vs ₹1,139 Cr).
Profit Margins: Healthy margins supported by IT services scale.
Debt Ratios: Debt-to-equity very low (0.07), strong balance sheet.
Cash Flows: Consistent positive operating cash flows.
Return Metrics: ROCE 24.3%, ROE 18.3% — solid efficiency and shareholder returns.
💹 Valuation Indicators
P/E Ratio: 34.5, above industry average (20.7), indicating premium valuation.
P/B Ratio: ~6.4 (Price ₹1423 / Book Value ₹222), relatively high.
PEG Ratio: 15.3, suggesting overvaluation relative to growth.
Intrinsic Value: Fair value closer to ₹1200–1250, current price slightly overvalued.
Dividend Yield: 3.59%, attractive for income investors.
🏢 Business Model & Competitive Advantage
Operates in IT services, consulting, and digital transformation.
Strong client base across telecom, BFSI, and manufacturing.
Competitive edge: Tata Group backing, global delivery model, and diversified service portfolio.
Challenges: Intense competition from Infosys, TCS, Wipro, and global players.
📈 Entry Zone & Long-Term Guidance
Entry Zone: ₹1300–1350 (near support levels).
Long-Term Holding: Suitable for long-term investors seeking steady dividends and exposure to IT services, though growth may be slower compared to peers.
✅ Positive
Strong ROCE (24.3%) and ROE (18.3%).
Low debt-to-equity (0.07).
Attractive dividend yield (3.59%).
FII holdings increased (+0.65%).
⚠️ Limitation
Valuation stretched (P/E 34.5 vs industry 20.7).
PEG ratio high (15.3), indicating weak growth relative to price.
Quarterly profit decline (-23.8%).
🚨 Company Negative News
PAT dropped sharply from ₹1,139 Cr to ₹541 Cr.
DII holdings decreased (-0.45%).
Margins under pressure due to global IT slowdown.
🌟 Company Positive News
Strong dividend payout policy.
FII confidence rising.
Stable revenue base with diversified clients.
🏭 Industry
IT services industry facing global demand slowdown.
Industry PE ~20.7, Tech Mahindra trades at premium.
Growth drivers: cloud adoption, AI, digital transformation, cybersecurity.
📌 Conclusion
Tech Mahindra is a moderately strong IT services stock with solid fundamentals, low debt, and attractive dividends. However, current valuations are stretched, and profit growth is slowing. Best entry zone is ₹1300–1350, with long-term holding suitable for investors seeking steady returns and dividend income rather than aggressive growth.
Would you like me to prepare a peer comparison of Tech Mahindra vs Infosys vs TCS to highlight relative strengths and valuations?