Tech Mahindra’s Q3FY25 performance has led to mixed responses from leading brokerages, with varied ratings and target price adjustments. Here’s what the analysts have to say:
Citi on Tech Mahindra
- Rating: Maintain ‘Sell’
- Target Price (TP): Cut to ₹1,440 from ₹1,475
- Key Insights:
- EBIT came ~4% below expectations, despite provision reversals.
- Forward-looking indicators: headcount grew 3% YoY and total contract value (TCV) rose 21% YoY on a low base.
- Lowered FY25-27 EPS estimates by 3-4% due to sector challenges and Q3 trends.
- Wage hikes and high expectations in a tough sector backdrop are likely to pressure Q4 margins.
- FY26-27 EPS estimates remain 7-10% below consensus.
Morgan Stanley (MS) on Tech Mahindra
- Rating: Maintain ‘Equal Weight’
- Target Price (TP): Raised to ₹1,750 from ₹1,725
- Key Insights:
- Earnings beat expectations, driven by growth in healthcare, BFSI, and other verticals.
- Solid new deal wins of $745 million, up 24% QoQ.
- Upside risks to margins appear low; portfolio mix keeps revenue growth forecasts conservative.
Nomura on Tech Mahindra
- Rating: Maintain ‘Buy’
- Target Price (TP): ₹1,900
- Key Insights:
- Q3FY25 results beat across all parameters.
- Revised FY25-27 EPS estimates marginally by 0-2%.
- Expected dollar revenue growth of 0.9-9.2% YoY and EBIT margins of 9.3-13.2% over FY25-27.
- Further deterioration in discretionary demand is unlikely.
Jefferies on Tech Mahindra
- Rating: Maintain ‘Underperform’
- Target Price (TP): ₹1,480
- Key Insights:
- Q3 results missed estimates due to FX headwinds but margins expanded 60bps QoQ.
- Healthy order wins and cost controls drive optimism; margins are projected at 15% by FY27.
- Retains earnings estimates with a 26% EPS CAGR over FY25-27.
- High EPS sensitivity to margin assumptions could limit re-rating.
Brokerages remain divided on Tech Mahindra, reflecting cautious optimism for the company’s growth outlook. While Citi retains its ‘Sell’ rating citing margin pressures, Nomura and MS maintain a positive stance with higher targets, emphasizing steady progress and deal wins. Jefferies highlights concerns over margin sensitivity despite long-term potential.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are advised to consult their financial advisor before making any investment decisions.
