Last Update17 Oct 25Fair value Decreased 2.15%
The analyst price target for Tech Mahindra was revised slightly downward from ₹1,605 to ₹1,571, as analysts cited a minor increase in the discount rate. However, they noted projected improvements in revenue growth and profit margin that support the updated outlook.
Analyst Commentary
Bullish and bearish analysts have weighed in on Tech Mahindra's latest outlook, reflecting ongoing discussions around the company's valuation, growth trajectory, and execution in a changing market environment.
Bullish Takeaways- Bullish analysts highlight anticipated improvements in revenue growth and profitability. These factors are seen as supportive of the company's revised valuation.
- There is optimism around Tech Mahindra's ability to navigate macroeconomic challenges and maintain margin expansion, despite global uncertainties.
- Some analysts point to the company's exposure to secular growth trends in digital transformation and next-generation technologies. These are viewed as long-term value drivers.
- Forecasts suggest that sustained execution on contract wins and cost efficiencies could further bolster the company's fundamentals and enhance shareholder value.
- Bearish analysts note the slight downward revision to the price target, attributing it to an incremental rise in the discount rate. This reflects lingering risks in the external environment.
- Cautious perspectives center on potential headwinds from softening client demand in certain regions, which could affect near-term revenue visibility.
- There are concerns that higher discount rates and global economic uncertainty may temper valuation multiples. This could limit upside until clearer signs of demand recovery emerge.
- Questions remain about the sustainability of recent margin improvement, particularly if competitive pressures intensify in core business segments.
What's in the News
- Tech Mahindra and Abacus Insights formed a strategic partnership to streamline compliance and modernize healthcare data interoperability for U.S. healthcare payers, aiming to reduce administrative burden and improve data usability. (Key Developments)
- The company announced a partnership with Canal Insurance Company to lead digital transformation in the North American commercial auto and property & casualty insurance market through cloud, data, and AI-enabled solutions. (Key Developments)
- Tech Mahindra launched TechM Orion Marketplace, an Agentic AI ecosystem designed to centralize governance, automate workflows, and deliver enterprise-grade AI solutions across industries. (Key Developments)
- An agreement was signed with AMD to support next-generation enterprise transformation leveraging hybrid cloud and AI infrastructure. This targets sectors such as manufacturing, finance, and healthcare. (Key Developments)
- A board meeting was held to consider financial results and to declare an interim dividend of Rs. 15 per equity share for the 2025-26 financial year. October 21, 2025 was set as the record date. (Key Developments)
Valuation Changes
- Consensus Analyst Price Target: Decreased marginally from ₹1,605 to ₹1,571.
- Discount Rate: Increased slightly from 15.99% to 16.04%, reflecting a minor rise in risk expectations.
- Revenue Growth: Improved from 7.27% to 7.58%, indicating enhanced growth projections.
- Net Profit Margin: Increased modestly from 11.84% to 11.90%, pointing to slightly better expected profitability.
- Future P/E: Declined from 28.54x to 27.24x, suggesting a marginally lower valuation multiple.
Key Takeaways
- Strategic focus on high-growth verticals and geographic expansion is expected to drive revenue growth.
- AI-driven innovations and operational efficiencies are likely to expand margins and enhance earnings quality.
- Challenges in scaling, declines in key sectors, and risks in customer renewals and market stability may limit Tech Mahindra's future revenue growth.
Catalysts
About Tech Mahindra- Provides information technology services and solutions in the Americas, Europe, India, and internationally.
- Tech Mahindra's strategic focus on high-growth verticals such as BFSI and healthcare, as well as geographic expansion into prioritized markets like APG and Europe, is expected to drive future revenue growth.
- Operational efficiencies and margin improvements driven by Project Fortius are significant catalysts expected to enhance net margins moving forward.
- The launch of TechM Consulting and the focus on AI-driven innovations are initiatives likely to boost revenue and margin expansion through high-value services.
- Continued investments in key leadership hires and upskilling initiatives suggest a strategic focus on strengthening core operations and capabilities, impacting earnings positively.
- Strategic partnerships and robust deal win momentum are positioned to support top-line growth and improve earnings quality through diversified revenue streams.
Tech Mahindra Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Tech Mahindra's revenue will grow by 7.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from 8.5% today to 11.9% in 3 years time.
- Analysts expect earnings to reach ₹77.8 billion (and earnings per share of ₹87.7) by about September 2028, up from ₹45.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹62.3 billion.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.9x on those 2028 earnings, down from 29.4x today. This future PE is greater than the current PE for the IN IT industry at 26.7x.
- Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 15.9%, as per the Simply Wall St company report.
Tech Mahindra Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The 0.3% revenue growth on a constant currency basis demonstrates stagnation compared to a previous exit rate of minus 7%, which shows challenges in scaling the business. Continuous stagnation could impact future revenue growth.
- The decision to scale down non-core and loss-making businesses resulted in a 1% reduction in the topline, indicating that future revenue growth might be limited if core-business expansion does not compensate for these reductions.
- The decline in the manufacturing sector by about 1% and the communications sector by 4.2% reflects weaknesses in these verticals, potentially impacting overall revenue and profit margins in the future.
- A sequential revenue decline in Q4 was primarily due to delays in customer renewal decisions and reduced discretionary spending in specific sectors, demonstrating potential risks in timely contract renewals and customer spending which could impact revenues.
- The transportation towards revenue growth from prioritized markets such as Americas and non-core markets which generates a high percentage of revenue, encounters possible risks if these markets do not stabilize or grow, ultimately affecting growth projections and revenue diversification.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of ₹1626.048 for Tech Mahindra based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2020.0, and the most bearish reporting a price target of just ₹1110.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹656.4 billion, earnings will come to ₹77.8 billion, and it would be trading on a PE ratio of 28.9x, assuming you use a discount rate of 15.9%.
- Given the current share price of ₹1508.2, the analyst price target of ₹1626.05 is 7.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Read more narratives
₹1.17k
FV
25.0% overvalued intrinsic discount4.51%
Revenue growth p.a.
0users have liked this narrative
0users have commented on this narrative
1users have followed this narrative
₹2.02k
FV
27.6% undervalued intrinsic discount8.70%
Revenue growth p.a.
0users have liked this narrative
0users have commented on this narrative
0users have followed this narrative