'Reduce' Tech Mahindra Shares Retains PL Capital Post Q1 Results

Tech Mahindra continued its margin improvement trajectory with another quarter of sequential growth. Ebit margin improved by 60 bps QoQ to 11.1%, compared to PL Capital and consensus estimates of 10.9% and 11%, respectively..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..PL Capital Report.Tech Mahindra Ltd.'s revenue growth (-1.4% constant currency QoQ) was below our estimates (-1.0% CC QoQ), while margins were fairly in line with our expectations. Despite the sequential de-growth, the constructive recovery is visible in communication and retail, while BFSI continued its momentum in Q1. Communication (~34% of revenue) remains in a bright spot with a steady recovery in Telco despite the negative seasonality in Comviva. Automotive within manufacturing remains a challenge, although it reported sequential improvement in Q1. The structural weakness within Automotive will continue to persistent for the rest of the year. Considering the Q1 weakness, the ask-rate for the rest of the year to achieve flat FY26 CC growth is ~0.8% CQGR, which we believe is a little challenging, given the underlying macro uncertainties. Although communication has improved, it is difficult to draw a trend, given the conversion on deal TCV also tends to be slower than anticipated. However, we believe the cost optimisation efforts would continue at a similar pace of FY25 with continued efforts to rationalize employee pyramid and leveraging project Fortius. We are baking in revenue growth of -1.2%/+3.4% CC YoY with margin improvement of 170bps/280bps YoY in FY26E/FY27E. We assign 20x to its FY27E EPS, which translates to a target price of Rs 1,470. The stock is currently trading at 22x, leaving no potential upside. Retain, Reduce..Click on the attachment to read the full report:.'Buy' Tech Mahindra Shares Maintains Motilal Oswal Post Q1 Results; Sees Upto 24% Upside.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

'Reduce' Tech Mahindra Shares Retains PL Capital Post Q1 Results

Considering the Q1 weakness, the ask-rate for the rest of the year to achieve flat FY26 CC growth is ~0.8% CQGR, which PL Capital believes is a little challenging, given macro challenges.

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