Tech Mahindra drops over 4% after Q1 earnings; brokerages maintain cautious approach, here's why

Most of the brokerages downgraded Tech Mahindra Ltd and cut its target price post its weak June quarter earnings.

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26 Aug, 2025 12:21

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Shares of Tech Mahindra fell over 4 per cent in early trade on July 27 on BSE a day after the company reported its Q1FY24 earnings. It hit a low of Rs 1097.25 a share. The stock fell for five straight sessions and was down 12.4 percent.

Most of the brokerages downgraded Tech Mahindra Ltd and cut its target price post its weak June quarter earnings.

Kotak Institutional Equities have downgraded the stock to reduce from add and lowered target price to Rs 1,100 a share from Rs 1,143 a share. Nuvama Research has downgraded the stock to reduce and cut target price to Rs 1,000 a share from Rs 1,140.

ICICI Securities has reiterate its sell rating and expects a target price of Rs 900 a share, down 20 percent, JM Financial has maintained its hold rating and cut target price by 7 percent to Rs 1060 a share.

The IT firm reported a weak quarter. Tech Mahindra saw its revenue fall by 4 percent sequentially to $1600.7 million. Revenue has fallen 4.2 percent in constant currency terms, making this the steepest fall among its peers. Wipro and HCLTech also saw a decline in revenue this quarter. It reported a 38 percent year-on-year decline in net profit which stood at Rs 692.5 crore.

Also Read: Tech Mahindra Q1 Results: Net profit down 38% YoY to Rs 693 crore

Brokerage firm Kotak has cut FY2024-26 EPS estimates by 6-18% with the maximum reserved for FY2024. It forecast revenue decline of 2.2% in FY202. " The full impact of the interventions of Mohit Joshi will be visible by FY2025E. We forecast c/c revenue growth of 8.3 percent and EBIT margin expansion by 300 bps in FY2025E. However, TM stock has already run up in the past three months despite facing the highest EPS cuts. The stock is fully valued at 17X FY2025E", Kotak report added.

Tech Mahindra's CEO and MD CP Gurnani said that this was one of the toughest quarters for the company in the last five years. This comes at a time when the business environment is getting challenging for the IT companies with several major firms cutting down on growth guidance.

This quarter, Tech Mahindra's incoming CEO and MD Mohit Joshi also joined as a senior board member from June 19. Gurnani is set to retire on December 19.

Although analysts hold an optimistic view of the new CEO, Mohit Joshi, they also acknowledge the significant challenge he faces in revitalizing the company's performance in terms of growth and margins. Any strategies he devises and implements will require time to show results in the earnings, which could lead to a period where the company's stock may underperform compared to its peers.

EBIT margins came in at 6.8 percent, a fall of 440 bps from last quarter's 11.2 percent. The company's total contract value (TCV) or deal wins stood at $359 mn, down from $592 mn (-39.36 percent) in the last quarter, and $802 mn (-55.24 percent) in the same quarter last year.

"TechM’s weak Q1 performance in conjunction with FY23’s low exit rate, coupled with paltry deal flow and shaky macros, will likely keep the company’s revenue growth flat in FY24 – significantly below peers", said Nuvama in its latest report.

Meanwhile, Nomura has maintained its buy rating and increased its target price by 15 percent to Rs 1316 a share amid inexpensive valuations and considering 4.5 percent of higher dividend yield.