Neutral Tech Mahindra; target of Rs 1850: Motilal Oswal

Neutral

Motilal Oswal's research report on Tech Mahindra

Tech Mahindra (TECHM) reported 3QFY25 revenue of USD1.5b, up 1.2% QoQ in constant currency (CC) vs. our estimate of flat CC growth. Healthcare/BFSI led the growth (+4.5%/2.7% QoQ CC), while Communications and Technology were muted on CC basis. EBIT margin was up 60bp QoQ at 10.2%, beating our estimate of 9.7%. Adj. PAT stood at INR9.8b (down 21.4% QoQ but up 36.8% YoY), in line with our estimate of INR10b. For 9MFY25, revenue/EBIT/PAT grew 1.2%/24.2%/16.3% vs. 9MFY24. We expect revenue/EBIT to grow by 5.2%/35.9%, but PAT to decline by 4.7% YoY in 4QFY25. Net new deal TCV was USD745m, up 23% QoQ/95% YoY. We value TECHM at 25x FY27E EPS with a TP of INR1,850 (11% upside). We reiterate our Neutral rating on the stock.

Outlook

We remain on the sidelines, as we believe the current valuation fairly factors in the uncertainties around growth and margin. We value TECHM at 25x FY27E EPS with a TP of INR1,850 (11% upside). We reiterate our Neutral rating on the stock.

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