Tech Mahindra’s share price slipped over 2% to an intra-day low of Rs 1,572.30 on the National Stock Exchange. The stock is a key loser on the Nifty 50. This is after the company reported a 1.4% fall in revenue sequentially. The brokerages are divided in their stance on the stock as the fall in margins is somewhat offset by better deal wins.
Nuvama on Tech Mahindra: Margin expansion problem to linger on
Tech Mahindra has been delivering on deal wins, but margins, while expanding, are still far from its guidance. Margin expansion will be even more difficult here after, given the low-growth and weak macros and limited levers for expansion, said Nuvama Institutional Equities.
Despite inferior margins and returns profile, Tech Mahindra trades at a valuation comparable to large-cap peers. “We are trimming FY26 and FY27 (<2.5%) and continue to value the stock PE at 19x for FY27,” said Nuvama.
However, Nuvama said that Tech Mahindra posted decent Q1FY26 results. Revenue came in at $1,564 million, a fall of 1.4% CC QoQ, missing the estimate of a 0.8% CC QoQ decline. EBIT margin expanded 50 basis points QoQ to 11.1%, in line with the estimate. The net profit stood at Rs 1,140 crore, which was lower than the brokerage’s estimate. Total Contract Value (TCV) was solid at $809 million, an increase of 51% YoY.
Nuvama retained its ‘Reduce’ rating, with an unchanged target price of Rs 1,300, implying a downside of 19% from the current market price.
Motilal Oswal on Tech Mahindra: Restructuring turning out well
Motilal Oswal said that Tech Mahindra continued to deliver decent deal TCV performance, with deal TCV standing at $809 million, which is up 51% YoY.
“The ongoing restructuring under the new leadership is tracking well, and this quarter was another step in the right direction. We continue to like Tech Mahindra’s bottom-up turnaround story,” said Motilal Oswal.
The brokerage maintained its ‘Buy’ rating on Tech Mahindra and expects the stock to trade at a 25x EPS by FY27. Motilal Oswal reiterated the price target of Rs 2,000, implying an upside of 24%.
The IT giant’s revenue fell 1.4% QoQ in constant currency (CC); however, it was better than the brokerage’s estimate of 1% cc decline.