Buy Tech Mahindra; target of Rs 1590: ICICI Securities

ICICI Securities is bullish on Tech Mahindra recommended buy rating on the stock with a target price of Rs 1590 in its research report dated October 26, 2023.

Broker Research

October 27, 2023 / 11:35 IST

Buy

26 Aug, 2025 12:21

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ICICI Securities research report on Tech Mahindra

Tech Mahindra’s (TechM) Q2FY24 result, as expected, was weak on all fronts, including revenue growth and margins. Sequential revenue decline was further exacerbated by weakness in communication vertical globally (where TechM has still very high reliance and which may prove as Achilles heel in Mohit Joshi’s (MD & CEO designate) turnaround efforts at TechM, in our view) and TechM’s conscious efforts to deliberately move out of non-core geographies, clients and service lines. Business rationalisation may continue in Q3FY24E as well, given certain projects need regulatory approvals before closure/divestiture. This, along with weak macro outlook for discretionary tech spend, implies that signs of demand revival for TechM may only reflect from FY25E.

Outlook

Given the above backdrop, we cut our FY24-26E EPS estimates by 26%/19%/8%, led by both lower revenues and EBIT margins. We expect TechM’s EBIT margins to move up from 6.1% in FY24E to 11.4%/14.8% in FY25E/26E on the back of various levers (refer EBIT margin walk in Exhibits 3 & 4). Our revised 12-month target price now stands at INR 1,372 (vs prior INR 1,590), implying 20% potential upside, and we reiterate our BUY rating on the stock.

For all recommendations report, click here