The stock was trading 1.85% higher at ₹1,538.40 as of 12:20 pm, extending gains from the previous session. While HSBC reiterated its bullish stance and Nomura raised its valuation multiple, Jefferies remained cautious, arguing that much of the company’s improving fundamentals are already reflected in the stock price.
Tech Mahindra reported a consolidated net profit of ₹1,486.3 crore for the June quarter, below the CNBC-TV18 poll estimate of ₹1,694 crore. However, revenue came in ahead of expectations at ₹15,711.9 crore, compared with the poll estimate of ₹15,486 crore.
In dollar terms, revenue stood at $1.66 billion, versus the CNBC-TV18 poll estimate of $1.64 billion, while constant currency revenue grew 2.6% sequentially, well ahead of the Street’s expectation of 1% growth.
EBIT rose 8.6% sequentially to ₹2,264 crore, beating estimates, while EBIT margin expanded 60 basis points quarter-on-quarter to 14.4%, marginally above the CNBC-TV18 poll estimate of 14.3%.
The company also reported total contract value (TCV) deal wins of $1.078 billion, up 33.3% year-on-year, marking the third consecutive quarter in which quarterly deal wins exceeded the $1 billion mark. It also delivered its fourth consecutive quarter of EBIT margin expansion, while IT attrition eased to 11.8%.
Why analysts remain divided on Tech Mahindra
HSBC maintained its ‘Buy’ rating with a price target of ₹1,635, implying an upside of around 8.3% from Thursday’s closing price of ₹1,510.30.
The brokerage said the June quarter was better than expected, with growth accelerating to 6% year-on-year and management’s outlook for the second quarter and FY27 remaining encouraging.
It also expects Tech Mahindra’s EBIT margin expansion to continue, with the company on track to achieve its 15% FY27 margin target, adding that stronger growth than peers justifies its valuation premium.
However, Nomura retained its ‘Neutral’ rating but raised its target to ₹1,600, indicating an upside of about 5.9%. The brokerage said the June quarter beat estimates across all parameters and believes the company is on track to achieve its FY27 goals.
It also increased its valuation multiple to 18 times FY28 earnings from 16 times, citing expectations that Tech Mahindra will outgrow large-cap IT peers over FY27-FY28.
Jefferies, however, reiterated its ‘Underperform’ rating with a target price of ₹1,260, implying a downside of around 16.6% from Thursday’s close.
While the brokerage acknowledged that revenue and margins exceeded estimates and highlighted strong deal wins that support its expectation of 6% constant currency revenue growth in FY27, it believes the stock’s valuation remains rich despite raising its FY27-FY29 earnings estimates by 6-8%.
Shares of Tech Mahindra are among the best performers among the largecap IT space so far this year, currently trading with declines of around 4%. The stock also has the second-highest “buy” recommendations among IT stocks listed on the Nifty 50 index, with 67% of the 45 analysts covering the stock having a bullish stance.
