Reviews

In this edition, we have reviewed Tech Mahindra Ltd. and General Electric T & D India Ltd. We suggest ourreader-investors to HOLD Tech Mahindra Ltd. and General Electric T & D India Ltd. 

We had recommended TechMahindra Ltd. in Volume 36,Issue No. 23 dated October 11-24,2021 under the ‘Choice Scrip’ segment. Therecommended price for the stock was₹ 1,413. We had recommended the stock onthe basis of improved profitability, risingdemand for services, and high ROCE. Thecompany’s focus is on enabling end-to-enddigital transformation for global consumersby leveraging next-generation technologieslike 5G, blockchain, quantum computing,cybersecurity, artificial intelligence, andmore.

Mahindra Group was founded in 1945 andis one of the world’s largest and mostadmired multinational conglomerates,employing 260,000 people in over 100countries. The company’s quarterly consolidated financials indicate that netsales increased by 18.7 per cent in Q3FY22to ₹ 11,450.80 crore as compared to₹ 9,647.10 crore in Q3FY21. The operatingprofit climbed to ₹ 2,283.10 crore inQ3FY22 from ₹ 2,116.40 crore in Q3FY21i.e. a 7.88 per cent rise.

Similarly, the net profit rose to ₹ 1,378.90crore in Q3FY22 from ₹ 1,289.60 inQ3FY21, gaining only 6.92 per cent. Theannual performance of net sales showsdecent returns of 2.68 per cent in FY21 of₹ 37,855.10 crore as compared to₹ 36,867.70 crore in FY20. The operatingprofit swelled by 13.17 per cent to₹ 7,583.40 crore in FY21 as compared to₹ 6,701 in FY20. Subsequently, the annualnet profit showed a gain of 11.5 per cent inFY21, surging to ₹ 4,351.80 crore as opposed to ₹ 3,902.90 crore in FY20. Thisquarter, the company got a new deal of₹ 5,387 crore, which is consistent with theprevious four quarters (₹ 1,729 crore and₹ 3,657 crore for enterprise). During thequarter the company hired over 4,000 newemployees.

Tech Mahindra has tremendousdevelopment possibilities in terms ofmodernising communication serviceproviders’ networks and 5G-relatednetwork spends due to its dominantposition across sub-verticals withincommunication. It has recently acquiredCTC, a software development outsourcingfirm. Trimming low-return countries,accelerating in Europe, and rising demandfrom lift-and-shift deals will all contributeto 13.6 per cent CAGR in FY21-FY24.Over the last five years, the share price ofTech Mahindra has increased by almost 3.3times from ₹ 468 in January 2017 to ₹ 1,570levels in January 2022.Hence, werecommend HOLD.

We had recommended General Electric T & D India Ltd. inVolume 36, Issue No. 23 datedOctober 11-24, 2021 under the ‘LowPrice’ segment. The recommended pricefor the stock was ₹ 126. We hadrecommended the stock on the basis ofpositive outlook, new opportunities, andfocus on digitization and automation.General Electric is a high-tech industrialbusiness with four industrial segments,namely, power, renewable energy,aviation and healthcare), as well as afinancial services segment that worksglobally. The company serves customersin over 170 countries. Manufacturingand service operations are carried out at82 manufacturing plants located in 28states in the United States and PuertoRico and at 149 manufacturing plantslocated in 34 other countries.

Analysing the financial performance ofthe company in the recent quarter, the net profit declined by 11.62 per cent from₹ 1,034.21 crore in Q3FY21 to ₹ 914.08crore in Q3FY22. However, the operatingprofit slipped significantly by 60.87 percent in Q3FY22 to ₹ 30.61 crore ascompared to Q3FY21 which was ₹ 80.27crore. Consequently, the companyreported net loss, plunging to ₹  -0.10crore in Q3FY22 from ₹ 55.92 crore inQ3FY21. The annual performance of thecompany shows positive results. The netprofit indicates growth of 9.3 per cent i.e.to ₹ 3,452.37 crore from ₹ 3,158.70 crorein FY20. The operating profit showedgain of ₹ 210.98 crore in FY22 ascompared to operating loss of ₹ 155.52crore in FY20.

The company made a net profit of₹ 60.32 crore in FY22 as opposed to netloss of ₹ 302.56 crore in FY20. To take anoverall view of the sector that GeneralElectric operates in, India’s HydrogenEnergy Mission to generate hydrogen from renewable energy sources will placethe country at the forefront of energytransition through infrastructure development,railway electrification and thescrapping of outdated vehicles, amongother things, and may encourage the useof more electric vehicles (EVs), resultingin higher per capita consumption. Theadoption of electric vehicles will result inincreased demand for electricity, necessitatingthe modernisation of gridinfrastructure.

The National Electric Mobility MissionPlan aspires for EV adoption to reach 100per cent by 2030. As a result, multinationalfinancing companies such as Germany’sKFW Group, Japan International CooperationAgency (JICA) and the WorldBank 6have become key investors inIndia’s power sector. The Government ofIndia has successfully enticed KFW toinvest in more renewable energy evacuationprojects. KFW plans to invest USD500 billion in the sector through 2028 forprojects. All this will be in favour ofGeneral Electric T & D. Hence, werecommend HOLD.

(Closing price as of May 16, 2022)