'Reduce' Tech Mahindra, 'Add' L&T Tech Shares Maintains HDFC Securities Post Q1 Results — Here's Why

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HDFC Securities Institutional Equities

Tech Mahindra - Margin resilience

Tech Mahindra Ltd. delivered in-line performance on both revenue and margins for the quarter. The company reported a sequential decline of -1.4% in CC terms, while Ebit margins improved to 11.1% (+56bps QoQ), marking the seventh consecutive quarter of margin expansion. The revenue dip was primarily due to weakness in the retail vertical and delays in client decision-making amid macroeconomic uncertainty.

Despite the revenue pressure, margin improvement was driven by cost optimization under Project Fortius, a favorable offshore mix, G&A cost rationalization, and portfolio company integration.

Deal wins for Q1 stood at $809 million, reflecting a YoY growth of 51.5%. Tech Mahindra anticipates better revenue growth in FY26 vs FY25, supported by a robust deal pipeline, and aims to outperform the peer group average in terms of growth.

The company remains committed to its margin targets for FY27 (15%), maintaining discipline in sub-contracting and pricing. Company’s “AI Delivered Right” strategy is gaining traction with clients, emphasizing the shift from proof of concept to production deployments.

Management describes the demand environment as dynamic and uncertain, presenting a mixed outlook.

We maintain Reduce on Tech Mahindra with a target price of Rs 1,425, based on 18x June FY27E EPS.

L&T Technology Services - Outlook maintained despite uncertainty

L&T Technology Services Ltd. reported Q1 FY26 revenue below expectations, primarily due to seasonal weakness in the SWC segment and challenges in the Mobility (Automotive) vertical. The Mobility segment was impacted by delays in decision-making on large deals, pauses in ongoing programs, and customer-driven discounting.

This vertical is expected to remain subdued in the near term. Despite these headwinds, L&T Tech has reiterated its double-digit revenue growth guidance for FY26E, which includes contributions from inorganic growth (factored in ~5% organic growth for FY26E).

The company also maintains its mid-sixteen Ebit margin target for the period between Q4 FY27E and Q1 FY28E. Management anticipates stronger performance in H2 FY26 compared to H1 FY26, both in terms of revenue and margins. L&T Tech has reaffirmed its medium-term revenue goal of $2 billion.

The robust momentum in large deal bookings during the quarter supports the view that FY26 will outperform FY25. The company aims to consistently achieve $200 million+ in Large Deal Total Contract Value each quarter, with plans to scale this further.

Given the uncertainties in the Mobility vertical, we have revised our earnings estimates downward. Nonetheless, we maintain our Add rating on L&T Tech, with a target price of Rs 4,700, based on 28x June FY27E EPS.

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