Tech Mahindra Q1 Review: Shares Hit Record High As Analysts Up Targets

New deal wins, growth in communications and enterprise verticals, and a pickup in 5G spending, among others, prompted most analysts to hike price targets for Tech Mahindra Ltd. after the first quarter of the ongoing fiscal, pushing the IT stock to a record high.

The software services provider reported new deal wins worth $815 million in the three months ended June. That led to a 25% sequential jump in profit during the period. Its revenue in dollar and rupee terms, too, increased but margin contracted because of wage hikes.

Shares of Tech Mahindra gained as much as 9.68% to a record high of Rs 1,237 apiece. Of the 49 analysts tracking the company, 41 maintained a ‘buy’, six recommended a ‘hold’ and two suggested a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 3.5%.

The stock has risen 30% so far in 2021compared with a 26% rally in the Nifty IT Index. The relative strength index was at 76, suggesting the stock may be overbought.

Here’s what brokerages have said about Tech Mahindra’s June-quarter numbers.


  • Recommends ‘hold’, raises target price to Rs 1,250 from Rs 1,200. It has an upside price target scenario of Rs 1,380 and a downside scenario of Rs 990.

  • A sharp revenue growth helped in controlling margin decline.

  • Growth remained broad-based with both communications and enterprise verticals seeing healthy growth on the back of new deals.

  • Deal TCV was healthy at $815 million.

  • Optimism over 5G-related deal traction encouraging.

  • Expects margin to range between 14.7% and 15.3% over FY22-24.

  • While net hiring was strong, subcontracting costs are likely to remain high.

  • Expects Tech Mahindra to deliver 9%/8% revenue/EPS CAGRs over FY22-24.


  • Maintains ‘overweight’, hikes price target from Rs 1,250 to Rs 1,400, a potential upside of 24.11%.

  • Strongest sequential growth in June quarter in eight years.

  • Growth secular across verticals and geographies.

  • Margin decline was due to wage hikes and increase in subcontractors.

  • Strong deal win momentum and pipeline augur well for the upcoming quarters.

  • Expect margins to improve from here on, aided by operating leverage and higher offshoring.

  • Expects Tech Mahindra to report mid-teens headline growth, in line with peers .

Morgan Stanley

  • Upgrades to ‘overweight’ from ‘equal-weight’, increases target price from Rs 1,190 to Rs 1,350, a potential upside of 19.7%.

  • Revenue growth momentum is improving and becoming broad-based, thanks to double digit growth in communications vertical and improving margin.

  • Expects EPS estimates to rise as valuation remains reasonable.

  • Deal wins in the last two quarters have been solid.

  • Management noted that 60-70% of new signings in the communications vertical in Q1 include either integrating or adopting 5G, and it is participating across the breadth of 5G deals with respect to deal sizes.

  • Growth was broad based across all sub-verticals within the enterprise segment as well.

  • Forecasting a revenue growth of 13% in FY22.


  • Maintains ‘buy’, increases target price from Rs 1,300 to Rs 1,380, a potential upside of 23.27%.

  • June-quarter revenue and margins healthy despite seasonal headwinds.

  • Deal wins at $815 million provide good base for FY22-23 revenue growth outlook.

  • Raises FY22/FY23 EPS estimates by 3% each.

  • Risk-reward is favourable given the relatively inexpensive valuation.

  • June-quarter performance aided by sharp rebound in technology and manufacturing verticals.

Motilal Oswal

  • Maintains ‘neutral’ with a target price of Rs 1,220, a potential upside of 8%.

  • Communications and enterprise segments led revenue growth.

  • Expects Tech Mahindra to deliver revenue growth of 13% in this fiscal.

  • Expects Tech Mahindra to deliver stable-to-improving margin performance over the next three quarters.

  • Key risks: Attrition and utilisation levels remain a key risk on the downside for margins.

Prabhudas Lilladher

  • Recommends ‘buy’, raises target price from Rs 1,237 to Rs 1,494, an upside of 32.45%.

  • Deal wins were strong for the second consecutive quarter at $815 million.

  • Growth was led by enterprise segment and communications segment.

  • Management remained confident of maintaining EBIT margins above 15% despite headwinds from supply-side crunch.

  • Tech Mahindra will be the biggest beneficiary in 5G theme due to its strong play in network infrastructure services.

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