Buy Tech Mahindra Ltd for Target Rs.1,700 by Choice Institutional Equities
Deal Momentum and Margin Recovery Underpin FY27 Optimism: TECHM reported modest Q4FY26 with revenue and margin broadly in-line with though marginally below estimate, while deal wins emerged as the standout highlight of the quarter. Deal wins remained strong, supported by large transformation engagements and AI-led demand, with BFSI leading growth. With a strong AI-led deal pipeline and scope expansion opportunities within existing accounts, FY27 outlook remains cautiously constructive. Near-term revenue ramp-up from deal wins will be the key monitorable. We project Revenue/EBIT/PAT to grow at a CAGR of 8.0%/19.0%/20.6% over FY26– FY29E. Accordingly, we maintain our BUY rating with a target price of INR 1,700, taking a long-term view.
Steady Growth with Margin Expansion
* TECHM reported Q4FY26 revenue at USD 1,625 Mn, up 0.9% QoQ (vs CIE estimate of 1.5% QoQ growth) while in CC terms the top-line growth was 0.6% QoQ. In INR terms, revenue for the quarter stood at INR 150.7 Bn, up 4.7% QoQ and 12.6% YoY (vs CIE estimate of 3.7% QoQ growth). For the full year, USD revenue stood at USD 6,385 Mn, up 1.9% YoY and up by 0.6% YoY in CC terms; while revenue in INR terms came in at INR 568.2 Bn, up 7.2% YoY.
* EBIT margin expanded to 13.8% for Q4FY26, up 70 bps QoQ (vs CIE estimate of 13.9%). For FY26, EBIT margin stood at 12.6%, up 290 bps YoY.
* PAT for the quarter came in at INR 13.5 Bn, up 20.7% YoY (vs CIE estimate 21.5% YoY growth). For FY26, PAT stood at INR 48.1 Bn, up 13.2% YoY
Robust Deal Wins led by BFSI and Technology, Media & Entertainment
Q4FY26 New deal wins stood at USD 1,073 Mn, down 2.1% QoQ (up 34.5% YoY). TECHM reported robust deal momentum in FY26, closing record deal wins of USD 3,794 Mn, up 41.6% YoY, supported by large, multi-year transformation engagements. The pipeline remains strong, driven by AI-led transformation, cloud, and infrastructure modernisation deals. The number of USD 50 Mn+ clients increased to 29 (up four YoY), and USD 20 Mn+ clients grew to 66. BFSI was the fastest-growing vertical witnessing 8% QOQ growth, Technology vertical grew by 2.6%, Communications-Media grew by 1.9%, whereas, RetailLogistics-Transport, HLS & Manufacturing de-grew by 5.3%, 0.8% and 0.1%, QOQ, respectively. As the company enters FY27, the focus is on ramping up deal wins and benefiting from scope expansion within existing client relationships.
EBIT Margin improvement led by Project Fortius & FX Tailwinds
TECHM Q4 operating margin improved to 13.8%, a 70 bps improvement QoQ. This was led by Project Fortius, FX tailwinds and seasonal performance of Comviva (a subsidiary) positively impacted the operating profit. This was offset by strategic costs including AI investments and transition costs. In partnership with NVIDIA, TECHM launched an education-focused Large Language Model (LLM) aimed at democratising learning.
For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131
