Jefferies has retained its Underperform rating on Tech Mahindra, with a target price of Rs 1440, implying a 15% downside. While Q2 revenue beat estimates, driven by strong growth in the communications vertical and foreign exchange gains, normalized profits fell short of expectations.
The brokerage noted a decline in order bookings year-on-year, and management indicated that the demand environment remains unchanged, which raises concerns about future growth. Although Jefferies raised its FY25 earnings estimate by 4%, it remains skeptical about the company’s target of achieving 15% EBIT margins by FY27, calling it optimistic. The valuation at 26x FY26 estimated P/E also looks expensive.
Jefferies remains cautious about Tech Mahindra’s ability to meet its ambitious margin goals, despite encouraging Q2 revenue growth.
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