Tech Mahindra shares fell as much as 2% on Thursday to Rs 1,575 on the BSE after the IT major reported a 34% year-on-year (YoY) rise in consolidated net profit for Q1FY26 at Rs 1,141 crore, up from Rs 851 crore in the same quarter last year.
However, the profit missed Street estimates of Rs 1,211 crore.Revenue for the quarter rose 2.7% YoY to Rs 13,351 crore, compared with Rs 13,005 crore in Q1FY25slightly below Street expectations of Rs 13,374 crore.The fifth-largest IT services company by market capitalisation reported an EBIT of Rs 1,477 crore, up 34% YoY.Read More: Tech Mahindra Q1 Results: Cons PAT surges 34% YoY to Rs 1,141 crore, misses Street estimatesBrokerages had a mixed reaction to the results, with some highlighting the margin improvement and strong deal wins, while others flagged weak revenue growth, tough macro conditions and stretched valuations.
Here's how top brokerages are rating the stock post earnings:Live EventsMotilal OswalMotilal Oswal reiterated its 'Buy' rating on Tech Mahindra with a target price of Rs 2,000, implying a potential upside of 24% from current levels.
The brokerage said the results showed progress on multiple frontsparticularly stabilisation in the Communications vertical, margin expansion, and healthy deal wins.It noted that Tech Mahindras EBIT margin beat estimates and highlighted that FY27 guidance of 15% margin appears achievable if growth improves.
Despite revenue softness in some verticals, the brokerage sees the turnaround under the new leadership tracking well and maintained its margin assumptions at 14.4% for FY27.NomuraNomura maintained a 'Buy' rating with a revised target price of Rs 1,810, down slightly from Rs 1,840, implying an upside of nearly 15%.
While the Q1 results were a mixed bag, the brokerage remains optimistic about the companys medium-term transformation plan.It sees good progress on margins and expects revenue growth in FY26 to exceed FY25 levels.
Nomura also flagged the strong deal pipeline and traction in the Telecom vertical as positives, despite macro pressure in the Auto space.
EBIT margins are expected to expand to 13.7% by FY27, up from 9.7% in FY25.Emkay GlobalEmkay Global maintained a 'Reduce' rating with a target price of Rs 1,600, suggesting a limited downside of around 1%.
The brokerage trimmed FY2628 EPS estimates by up to 2.4% after the company missed profit expectations in Q1.Emkay cited high valuations as a concern and believes the current price already factors in a large part of the margin recovery story.
It values the stock at 20x Jun-27E EPS.NuvamaNuvama also retained a 'Reduce' call with a target price of Rs 1,300, indicating a downside of about 17%.
While deal wins were strong, the brokerage said margin expansion is likely to get tougher amid a weak macro and low growth.It believes that Tech Mahindra continues to trade at a valuation similar to its large-cap peers despite an inferior margin and returns profile.
Nuvama expects limited room for further margin improvement and cut its FY2627 estimates by up to 2.5%.Morgan StanleyMorgan Stanley maintained its 'Underweight' rating with a target price of Rs 1,555, which is marginally below the current market price.
The brokerage flagged strong deal wins and improving margins as positives but raised concerns about deal-to-revenue conversion, weak manufacturing outlook, and an overall tough macro.The brokerage warned that balancing growth and margins will become increasingly difficult going forward.JefferiesJefferies stayed 'Underperform' with a target price of Rs 1,400, implying a downside of 11%.
The brokerage acknowledged the profit beat but said it was driven by higher other income rather than operational strength.The firm remained cautious on Tech Mahindra's ability to hit its 15% EBIT margin target by FY27, noting that it would require consistent 75 bps quarterly expansion over the next seven quartersan optimistic assumption amid expected wage hikes and a subdued growth environment.(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own.
These do not represent the views of TheIndianSubcontinent)