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Motilal Oswal Report
Tech Mahindra Ltd. reported a strong set of Q1 FY27 results, prompting Motilal Oswal Financial Services to reiterate its 'Buy' rating and maintain a target price of Rs 1,900, implying a potential upside of about 26% from current levels.
The brokerage continues to view the company as its preferred pick among large-cap IT stocks.
Valuation and change in estimates
The brokerage highlighted that the ongoing turnaround under the new leadership continues to track well and this quarter was another step in the right direction. With above-peer growth looking increasingly achievable, Motilal Oswal continue to like Tech Mahindra's bottom-up turnaround story.
Accordingly the brokerage has raised its FY27E/FY28E organic constant currency revenue growth estimates to 7.1%/7.6% (vs 4.6%/5.2% earlier), reflecting stronger-than-expected execution, healthy deal ramp-ups and improving growth visibility.
However, the brokerage has keep its FY27E Ebit margin estimate broadly unchanged at 14.8%. Consequently, hedging losses largely offset the earnings upgrade, resulting in minimal change to our EPS estimates.
It values Tech Mahindra at 20x FY28 estimated earnings and maintains a Buy rating with a target price of Rs 1,900.
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