Emkay Global Maintains 'Reduce' Rating on Tech Mahindra, Targets Rs 1450
Tech Mahindra Reports In-Line Q4 Performance Amid Uncertainty
Tech Mahindra, a leading provider of digital transformation, consulting, and business re-engineering services, has posted an in-line operating performance in the fourth quarter of its fiscal year. According to Emkay Global Financial's research report, the company's revenue grew 0.9% quarter-over-quarter (QoQ) to USD1.63 billion, a slight increase of 0.6% on a constant currency (CC) basis, beating Emkay's estimates.
The company's earnings before interest, taxes, and amortization (EBITM) expanded by approximately 70 basis points (bps) QoQ to 13.8%, marking the 10th consecutive quarter of margin expansion. This growth was driven by operating efficiencies from Project Fortius, favorable currency tailwinds, and Comviva seasonality, partially offset by investments in artificial intelligence (AI) and large deals transition costs.
Deal intake remained strong, with a total contract value (TCV) of USD1.07 billion in Q4, the second consecutive quarter of over USD1 billion in TCV. Despite the uncertain macroeconomic environment, Tech Mahindra believes it has sufficient stabilizers and resilience to continue with growth acceleration in fiscal year (FY) 2027.
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The company's management reiterated its confidence in outperforming the peer-average growth by FY2027 and progressing toward a 15% EBITM margin, supported by broad-based growth, strong deal intake, a healthy deal pipeline, improved account mining, sustained investments in AI, consulting, high-growth service lines, and strengthening partnerships and alliances ecosystem.
Emkay's Revised Estimates
In light of the Q4 performance, Emkay Global Financial has revised its estimates for Tech Mahindra's earnings per share (EPS) for FY2026 and FY2027 by 1.7% and 1.5%, respectively. The research firm maintains a "REDUCE" rating for the stock, with a target price of Rs1,450, based on a price-to-earnings (P/E) ratio of 17 times its estimated EPS for March 2028.
| Financial Metric | Q4 FY2026 | Q4 FY2025 | QoQ Growth |
|---|---|---|---|
| Revenue (USD billion) | 1.63 | 1.62 | 0.9% |
| EBITM (%) | 13.8 | 13.1 | 70 bps |
| TCV (USD billion) | 1.07 | 0.98 | 9.2% |
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Investor Takeaway
Investors should be cautious about Tech Mahindra's growth prospects due to uncertain macro conditions.
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