Buy Tech Mahindra; target of Rs 1862: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Tech Mahindra

TechM aspires to achieve industry leading growth by investing in 4 big bets: -1) Connectivity (best invested in connectivity space), 2) Experience (CX deal bookings worth $567 Mn in H1FY22 with highest ever deal pipeline), 3) Cloud (Cloud has grown 2x YoY from $300mn to $600mn) and 4) Engineering. TechM’s Manufacturing, HiTech and BFSI verticals are trending towards $1Bn revenue in FY22. Investments in 5G are back with globally $130Bn invested in 5G core network. 5G for CSP and 5G for ecosystem has already started firing for TechM. 5G for Enterprise will grow in next 2 years. 5G revenue run-rate for TechM was ~USD 500 mn by Q2FY22. 20% of CME business is now 5G and 50% of all network services business is now 5G. 5G will enable sensor based connected world and drive new business models. 5G and 5G related business opportunity is expected to be $712 Bn by 2023.

Outlook

Our DCF based target price for TechM is 1862 (implying target multiple of 18.5x on FY24 EPS). TechM is currently trading at 20X/18.5X earnings multiple on FY23/24 EPS of INR 75.8/82.5 on FY22/23E respectively, inexpensive. TechM has Revenue/EPS CAGR of 12.8%/12.8% over FY22-24. Maintain Buy.

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