Tech Mahindra Shares Deep In Red As Brokerages Wait For Turnaround After Worse-Than-Expected Q1 Results

Shares of Tech Mahindra were deep in the red at open on Friday after the brokerages maintained bearish call on the IT firm after the company’s June quarter earnings missed estimates on Thursday.

What Happened: Tech Mahindra reported a net profit of ₹851.5 crore, up 22.96% from the previous year. Its revenue fell 1.16 % to ₹13,005.5 crore. Net profit missed estimates, while revenue was in-line with expectations. 

The company also reported $534 million (around ₹4,471 crore) in deal wins during the quarter. 

Brokerage Views: UBS maintained "sell" call on the company and increased the target price to ₹1,250, saying the company has had a good start to its new strategy. The company's FY25 guidance remained unchanged, and the research firm sees the company as a candidate for turnaround but will wait for its strategy to unfold before revising its outlook. 

Citi also maintained "sell" call on the stock and raised the target price to ₹1,260. Q1 results were mixed with selling, general, and administrative expenses-led margin improvement and total contract value trend remaining weak, the research firm said. Consensus estimates factor in 12.5% EBIT margins for FY26, which will not be easy to achieve without meaningful growth pickup, the brokerage said.

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Kotak Institutional Equities also retained a "reduce" call and raised its target price to ₹1,400. The brokerage raised FY25 and FY27 revenue and earnings per share estimate by 1%-3% and 3-4%, respectively, factoring in the optimism from the good start to its turnaround journey.

The stock’s valuation is close to companies like HCLTech and marginally lower than Infosys, which reduces the margin of safety, the research firm said.

Nuvama also maintained “reduce” with a target price of ₹1,200, anticipating near-term pain ahead of long-term gain. The research firm said that though Q1 results were a step in the right direction, growth will be difficult to come as telecom makes up a third of the company’s revenue, and margins are likely to face headwinds, such as building bench strength and investments in growth, before they can enjoy tailwinds, such as reduced costs.

Price Action: Shares of Tech Mahindra slumped 3.59% to ₹1,476.35 on Friday morning. 

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