Buy Tech Mahindra; target of Rs 1945: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Tech Mahindra

TechM announced acquisition of 100% stake in CTC, digital engineering and transformation provider serving Insurance industry for EUR 310 mn (~USD 353.7 mn) including EUR 100mn earnouts payable over 4 years. CTC generated revenue of EUR 71.3 mn (~81.36 USD mn) in CY20 which amounts to 2% of TechM’s FY21 revenue. In 9MCY21 it reported revenue of EUR 69 mn(~USD78.7mn) - (quarterly run-rate of USD 26 mn vs USD 20 mn in CY20). About 60% of its revenue are from an anchor client. CTC’s valuation of 4.3x EV/Sales is at upper end of similar transactions in this space. It is TechM’s largest and among its most expensive acquisitions, compelling the company to drive cross-selling deals for scaling up in insurance space. CTC acquisition will enable TechM – 1) to scale up in Insurance sector given CTC’s deep digital transformation expertise in the sector, 2) to expand Eastern European near shore delivery centre as CTC has over 720+ highly-skilled IT professionals located in Latvia (85%) and Belarus (15%), regions having highly skilled pool of tech talent and 3) provide TechM with tech talent having differentiated capabilities in end-to-end digital engineering which can be scaled up across different industries.

Outlook

Our EPS estimates increase by 1.6% for FY23& FY24 led by revenue increase in revenue growth estimates for FY23 & FY24. We arrive at DCF based target price of Rs.1945, earlier Rs. 1908 (implying target multiple of 23x on FY24 EPS). TechM is currently trading at 22.2/20.4x earnings multiple on FY23/24 EPS of INR 77/84.4 on FY23/24E respectively, inexpensive. TechM has Revenue/EPS CAGR of 13.8%/13.5% over FY22-24. Maintain Buy.

More Info on Trent

At 16:00 hrs Tech Mahindra was quoting at Rs 1,660.65, down Rs 61.00, or 3.54 percent.

It has touched an intraday high of Rs 1,746.30 and an intraday low of Rs 1,650.75.

It was trading with volumes of 144,037 shares, compared to its thirty day average of 121,490 shares, an increase of 18.56 percent.

In the previous trading session, the share closed down 1.01 percent or Rs 17.60 at Rs 1,721.65.

The share touched its 52-week high Rs 1,837.75 and 52-week low Rs 915.05 on 30 December, 2021 and 26 February, 2021, respectively.

Currently, it is trading 9.64 percent below its 52-week high and 81.48 percent above its 52-week low.

Market capitalisation stands at Rs 161,197.26 crore.For all recommendations report, click here

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