ICICI Securities Initiates "Hold" Recommendation on Tech Mahindra with Target Price of Rs 1390

Tech Mahindra's Turnaround Progress Continues

Tech Mahindra, a leading player in the IT services sector, has made significant strides in its turnaround journey, with the company entering its third year of growth. According to a research report by ICICI Securities, Tech Mahindra has seen a strong growth in its FY26 deal TCV, with a year-over-year (YoY) increase of 41.6%. This growth rate is higher than the company's average growth in larger accounts, and the company has added 63 must-win clients.

The company has reinforced its leadership position in the communications sector by winning two mega deals and is diversifying its business across other verticals. Despite an uncertain revenue growth environment, Tech Mahindra is on track to achieve its EBIT margin improvement target as per its guidance. The company has reiterated its goal of growing faster than its larger peers and delivering an EBIT margin of 15% in FY27.

Key Performance Indicators

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The research report by ICICI Securities has led to an increase in estimated earnings per share (EPS) for Tech Mahindra, with a 5% and 4% increase in EPS estimates for FY27 and FY28, respectively. This increase is driven by an upward revision in margin estimates.

Outlook and Valuation

ICICI Securities continues to maintain a HOLD rating on Tech Mahindra, as the company's turnaround progress is already priced into its valuation. The research firm values Tech Mahindra at 16x its price-to-earnings (P/E) ratio, based on its FY28 earnings per share (EPS) estimate of INR 87, resulting in a revised target price of INR 1,390.

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