Tech Mahindra shares tumble over 5% after lower-than-expected Q1 performance. Should you invest?

Shares of IT services firm Tech Mahindra on Friday slipped 5.5% to its day’s low of Rs 1,445.50 after reporting a 23% year-on-year (YoY) jump in its PAT at Rs 851 crore in the June quarter, which was slightly below the Street estimate of Rs 870 crore.

Revenue from operations was down 1% YoY to Rs 13,005 crore in the April-June 2024 period, while on a sequential basis, the profit after tax increased 28% and revenue rose 1%.

The company has reported an EBITDA of Rs 1,564 crore, which is up about 17% YoY, while margins improved 190 basis points YoY to 12%.


Here is what brokerages say:

Nomura: Buy| Target price: Rs 1,600

Nomura has maintained a buy call on Tech Mahindra with a target price of Rs 1,600.

Operationally, Tech Mahindra is at its bottom, with margin improvement happening in FY25F. Other cases of turnaround (such as Infosys in 2018-20) also took a three-year

period. Nomura expects the company to report a USD revenue decline of 0.5% in FY25F and a growth of 6.1% in FY26F with EBIT margins of 9% (+350bp y-y) and 12.1% in FY25F and FY26F, respectively.

Motilal Oswal: Neutral| Target price: Rs 1,470

Motilal Oswal has a neutral call on Tech Mahindra with a target price of Rs 1,470.

The dometic brokerage firm remains positive about the restructuring at Tech Mahindra under the new leadership and believes this quarter was another step in the right direction. But they expect the impact from these steps to be visible gradually. Further, the company’s presence in the communications segment, which remains under notable duress, makes the new management’s job that much harder.

“We remain on the sidelines as we feel the current valuation fairly factors in the uncertainties around growth and margin,” said Motilal Oswal in its report.

Nuvama: Reduce| Target price: Rs 1,200

Nuvama has maintained a reduce rating on Tech Mahindra with a target price of Rs 1,200 from an earlier Rs 1,000.

The company’s first quarter was a decent one, overcoming its Q1 seasonality. But the road to its target is a long and winding one. Nuvama tweaked FY25E/26E marginally (< 2%). And introduces FY27 estimates and rolling forward valuation to 18x Sep-26 PE (earlier 16x) on better growth visibility.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)