Tech Mahindra shares in focus as Q2 PAT falls 4% YoY. Do you have to purchase, promote or maintain?

Tech Mahindra is ready to be within the highlight on Wednesday as traders react to the corporate’s Q2FY26 earnings report. The IT main reported a 4.4% year-on-year (YoY) decline in its consolidated web revenue, which stood at Rs 1,194 crore, in comparison with Rs 1,250 crore in the identical quarter final yr.

Regardless of the dip in revenue, the income from operations rose by 5.1% to Rs 13,995 crore, up from Rs 13,313 crore within the year-ago interval. The corporate’s Earnings Earlier than Curiosity and Taxes (EBIT) additionally confirmed sturdy development at Rs 1,699 crore, marking a 15% enhance sequentially and a 32.7% soar YoY.

On a sequential (QoQ) foundation, PAT rose 4.7% from Rs 1,141 crore in Q1FY26, whereas the topline grew 4.8% QoQ, up from Rs 13,351 crore within the April-June quarter.

After the corporate’s Q2 outcomes, right here’s what brokerage companies have stated:

Goldman Sachs: Promote| Goal value: Rs 1,410

Goldman Sachs maintains a ‘Promote’ ranking on Tech Mahindra, revising its goal value to Rs 1,410 from Rs 1,380. The agency famous that Tech Mahindra’s outcomes beat expectations throughout the board, together with income development, margins, and deal wins.

Whereas administration expects FY27 to be higher than FY26, they don’t anticipate a big enchancment, citing restricted restoration in business development as a key constraint. Moreover, draw back dangers have elevated, because the broader IT business’s FY27 income development estimate of 5.5% YoY is now at greater danger of being revised downwards.Regardless of all main friends delivering in-line or better-than-expected development, investor issues linger as a consequence of weak demand visibility and disruption pushed by AI. Goldman Sachs additionally emphasised that the bearish narrative across the sector has strengthened, as demand restoration timelines stay unclear.Lastly, margins and development steerage stay beneath stress, primarily as a consequence of sluggish business situations, indicating a difficult atmosphere for sustained outperformance.

Morgan Stanley: Underweight| Goal value: Rs 1,555

Morgan Stanley maintains an ‘Underweight’ ranking on Tech Mahindra, with a revised goal value of Rs 1,555. The brokerage famous that Q2 outcomes had been in keeping with friends, however Tech Mahindra’s EBIT margin efficiency stood out and is predicted to be well-received by traders.

Deal wins remained strong at over USD 800 million, with administration projecting stronger development in H2FY26 in comparison with the primary half, excluding seasonality results. Consumer mining stays wholesome, as 17 out of 45–50 new purchasers have already surpassed the USD 1 million income run price.

Morgan Stanley highlighted that margin enlargement is prone to stem from gross margin enhancements and SG&A leverage. Nonetheless, the general restoration continues to be modest, with delays in decision-making and solely a gradual rebound anticipated within the communications section.

The 15% EBIT margin goal by FY27 is seen as bold, particularly within the face of macroeconomic volatility and US visa regulatory headwinds. Whereas FY26 margin estimates have been raised post-results, FY27–28 EPS projections have been lower by as much as 2.8%.

Lastly, Morgan Stanley famous that Tech Mahindra trades at a 1.6% low cost to HCLTech, however as a consequence of restricted upside to the goal value, the Underweight stance is maintained.

Nuvama: Cut back| Goal value: Rs 1,350

Nuvama has maintained a ‘Cut back’ ranking on Tech Mahindra, revising its goal value to Rs 1,350 from Rs 1,300. The corporate reported income of USD 1,586 million for the quarter, representing 1.6% QoQ development in fixed forex (CC) phrases, which exceeded Nuvama’s estimate of 0.9% CC development.

The EBIT margin improved 110 foundation factors sequentially to 12.1%, beating expectations of 11.8%. Nonetheless, PAT got here in at Rs 1,190 crore, which was barely beneath Nuvama’s estimate. Regardless of this, the Whole Contract Worth (TCV) remained sturdy at USD 816 million, marking a 35% year-on-year enhance.

Nuvama acknowledged that Tech Mahindra is progressing steadily in the direction of its FY27 targets, but additionally cautioned that future margin enlargement might grow to be more and more tough. The agency cited challenges similar to a low-growth atmosphere, weak macroeconomic situations, and restricted levers for enchancment.

Lastly, Nuvama tweaked its FY26E and FY27E EPS forecasts marginally by +0.1% and +1.1%, respectively. It additionally revised the rolling ahead valuation to 18x, in comparison with the sooner 19x, based mostly on the typical of FY27E–28E P/E.

Additionally learn: Axis Financial institution Q2 preview: Revenue seen falling 19% YoY as margin and value pressures persist

(Disclaimer: Suggestions, options, views and opinions given by the consultants are their very own. These don’t characterize the views of The Financial Occasions)