Most brokerages maintained their rating on the shares of Tech Mahindra Ltd. after the IT firm delivered mixed operating performance in the third quarter, while there were developments in margin expansion and deal wins.
Tech Mahindra's Q3 results demonstrated continued progress in the company's transformation journey, initiated under CEO Mohit Joshi's leadership. However, the pace of revenue growth remains moderate. While margin expansion is encouraging, sustained growth acceleration, particularly in the telecom vertical, is crucial for a more positive outlook, Nirmal Bang noted.
The brokerage reiterated ‘hold' rating, even though the turnaround story is favoured, as further evidence of this acceleration and the successful execution of the company's strategic initiatives is pending. Target price stands at Rs 1,851 per share (vs Rs 1,749 earlier) at an unchanged target multiple of 24 times.
Similarly, IDBI Capital maintained a ‘hold' rating. “Based on the company's growth trajectory in past year and upcoming strategy, we expect company to perform well." It also retained the target price at Rs 1,778 per share, which is 24 times FY27E EPS.
The company aims to achieve 15% margins by FY27E, against 6% in FY24 by pyramid correction (consistent fresher hiring), synergy benefits, higher fixed price projects (as pyramid will help in driving efficiency) and pricing.
Emkay Global noted that deal activities continue to be driven by consolidation and cost takeout opportunities. Management expects CY25 to be better than CY24, but suggested that it is likely to be an incremental improvement and not a V-shaped recovery. The large deal build up is steady and management is confident of gradually growing faster than peers.
Tech Mahindra continues to prioritise margin over growth in the near term, and is therefore selectively participating in large deals, it added. The brokerage maintained ‘add' rating with a target price of Rs 1,800 per share. It cut FY25E-27E EPS by 2-8% considering the Q3 miss.
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