Broker’s call: Tech Mahindra (Add)

Target: ₹1,821

CMP: ₹

Tech Mahindra reported broadly in-line performance for Q1FY26. The company reported revenue of of ₹1,335 crore (down 0.2 per cent q-o-q; up 2.7 per cent y-o-y in INR terms; up 1 per cen q-o-q, up 0.4 per cent y-o-y in $ terms; down 1.4 per cent q-o-q, down 1 per cent y-o-y in CC terms).

EBIT Margin increased by 60bps q-o-q to 11.1 per cent, led positive mix and operational levers. The company reported New Deal TCV of US$809 million. Total Headcount down by 214 q-o-q to 1,48,517 employees. Attrition increased by 80 bps q-o-q to 12.6 per cent. Utilisation down by 130 bps q-o-q at 85 per cent. Number of $50 mn+ clients at 26; up by 1 q-o-q.

Client sentiment remains cautious, particularly in automotive, where delayed decisions are impacting program starts. However, key markets such as North America and Europe are showing sequential growth, supported by a stable backlog and active pursuit of AI-led engagements.

We expect Revenue/EBITDA/PAT to clock CAGR of 7.7/19.1/22.5 per cent over FY25-FY28E. We have revised our FY26E/FY27E EPS by 1.9 per cent/(3.4 per cent). We rollover to Sep’27 estimates and maintain Add Rating on the stock with revised target price of ₹1,821 (vs ₹1,604 earlier) at PE of 22x (vs 20x earlier) on Sep’27E EPS. We have increased the target multiple from 20x to 22x on the account of consistent margin improvement trajectory.

Published on July 18, 2025