The brokerage said that Tech Mahindra reported another in-line quarter at EBIT level where slightly slower revenue growth was offset by a better EBIT margin and strong order-booking momentum.
Its focus currently is on three strategic pillars: mining top accounts, the addition of must have accounts (primarily Fortune 500 or Global 2000 companies) and large profitable deals.It expects growth to pick up from the next quarter, driven by ramp-ups in recently secured large deals, and says that FY26 revenue growth will surpass that of FY25.
HSBC, which has a ‘Buy’ rating and a price target of ₹1,900, said Tech Mahindra’s Q1FY26 performance, with EBIT margins around 11% and strong deal wins, is on track with its FY27 strategic plan.
Management also expects FY27 growth to be higher than its peer group average. However, HSBC cautioned that delays in margin expansion remain a key downside risk.
Nomura has also reiterated its ‘Buy’ rating on the stock, with a price target of ₹1,810. It described the Q1 FY26 results as a mixed bag but mentioned strong deal wins and a healthy pipeline.
The brokerage expects revenue growth in FY26 to be stronger than in FY25, supported by ongoing business recovery. It has revised its FY26-27 earnings per share (EPS) estimates upward by 1-2%.
The stock currently trades at 21.3 times its projected FY27 EPS.
On the flip side, Jefferies has an ‘Underperform’ rating on Tech Mahindra, with a price target of ₹1,400 per share.
The brokerage said that while Tech Mahindra’s Q1 revenues missed estimates, profits came in ahead of expectations due to higher other income.
Order wins were strong, and the company expects to return to growth from the second quarter.However, Jefferies pointed out that Tech Mahindra’s target of achieving 15% margins by FY27 requires an average quarterly margin expansion of 75 basis points over the next seven quarters, which looks very optimistic amidst 1-2 wage hike cycles and challenging growth environment.
It added that rich valuations based on overly optimistic consensus estimates compel it to maintain its ‘Underperform’ stance.
Citi has a ‘Sell’ rating on the stock, with a price target of ₹1,400.
The brokerage said that the company’s EBITDA performance was in line with expectations, though revenue declined 1.4% sequentially in constant currency terms, which was worse than Citi’s estimate of a 0.5% drop.
Margin performance was supported by lower other expenses, while gross margins contracted by 50 basis points quarter-on-quarter.
IT headcount remained largely stable both sequentially and year-on-year. Total contract value (TCV) stood at a decent $809 million for the quarter.
Management commentary pointed to a mixed demand environment, while verticals like manufacturing and hi-tech remain challenging, others are relatively stable.
Citi acknowledged that Tech Mahindra’s management is navigating well despite the difficult industry conditions.
However, the brokerage now expects revenue to remain largely flat year-on-year in FY26 in constant currency terms. It also flagged concerns on margin progression, estimating that achieving the 12.5% EBIT margin target for FY26 would require quarterly improvement of 90-100 basis points over the next three quarters, which it sees as increasingly difficult.
Morgan Stanley, which has an ‘Underweight’ rating, and a price target of ₹1,555, said that strong deal wins, stability in top clients and steady improvement in margins are key positives.
Weak conversion of deals to revenue, a tough outlook for verticals like manufacturing, & weak macro (balancing growth vs margins gets tougher) are some of the key concerns, the brokerage said.
Shares of Tech Mahindra Ltd. ended 1.87% higher on Wednesday at ₹1,608.50. The stock is down 6% so far this year.
