Q2 impact: TechM shares gain 8% as analysts raise earnings estimate, target

Tech Mahindra shares jumped 5 per cent and emerged as the top Sensex gainer after the Q2 results. SBI Securities said that it expects Tech Mahindra stock to outperform the broader IT sector and peers.

Tech Mahindra share price: Shares of IT company Tech Mahindra gained nearly 8 per cent to emerge as the top Sensex gainer in Friday's early trade after the company's second-quarter results beat expectations and prompted analysts to raise earnings expectations.

 

Tech Mahindra posted its earnings post-market hours on Thursday.

 

The IT stock opened at ₹1,714.95 on the BSE and rose to the day's high of ₹1,774, gaining 7.6 per cent against the last close of ₹1,648.70. As of 9.20 AM, Tech Mahindra's stock was trading 7.3 per cent higher at ₹1,770.

 

Along with a strong set of earnings, Tech Mahindra's board also announced its first bonus issue in 11 years in the ratio of 1:1. and a dividend of ₹15 per equity share, with the record date for the latter set as October 23.

 

 

Tech Mahindra Q2 results

The profit after tax (PAT) for the quarter under review came in at ₹1,586 crore, up 32.7 per cent year-on-year (YoY) on the back of a 15.6 per cent revenue increase to ₹16,180 crore.

 

The earnings before interest and tax (Ebit) grew 40.5 per cent YoY to ₹2,387 crore, while Ebit margins also saw a robust increase of 260 bps to 14.8 per cent. READ MORE

 

New deal wins TCV came in at $1,023 million Q2 FY27, up 25.4 per cent YoY.

 

What analysts said on Tech Mahindra Q2 show

Systematix Institutional Equities said that TechM delivered another strong performance, beating revenue and margin expectations on broad-based TCV bookings that mitigate vertical concentration risks.

 

Operational rigor keeps the 15 per cent FY27E Ebit margin target is well within reach, with AI productivity offering a longer-term lever, said Systematix analysts. Further, it added that Project Helix, the SpaceXAI partnership, and TechM’s AI assets strengthen its AI-led services proposition, though the company indicated that it would disclose its AI-led revenue in the second half of the fiscal.

 

Antique Stock Broking, too, said that Tech Mahindra delivered another strong quarter, with Q2 FY27 revenue growth of 2.4 per cent QoQ in CC terms versus its estimate of 1.5 per cent. 

 

Management is now within ~20bps of its FY27 EBIT margin target of 15 per cent and indicated that the focus is shifting towards growth, with AI-led productivity in fixed-price and managed services contracts and further pyramid rationalisation serving as incremental levers.

 

Following the better-than-expected Q2 results, Antique analysts raised their FY28/FY29 EPS estimates by 2–3 per cent and increased the target price to ₹1,575 (from ₹1,525), while retaining the 17x multiple on 1HFY29E EPS. It has a 'hold' recommendation on the stock.

 

Similarly, Systematix analysts too said that they have raised the FY28E–29E EPS estimates by 3.5%–5.0%, factoring in strong deal execution, robust TTM TCVs, profitability upside beyond the 15% margin goal, and USD/INR adjustments.

 

At CMP, the stock trades at 22x/18x/16x FY27E/FY28E/FY29E EPS, a premium to Tier-1 peers that is justified by superior margin delivery, improving capital allocation, and anticipated growth outperformance, said the brokerage. It reiterated a 'buy' call on the stock with a revised target price of ₹1,900, rolled forward and valued the stock at

19x Dec-28E EPS. 

 

Lastly, SBI Securities said that it expects Tech Mahindra stock to outperform the broader IT sector and peers.

 

"The company’s ability to convert its strong deal pipeline into revenue, revive BFSI growth and demonstrate measurable AI monetization will be key to sustaining its growth trajectory," analysts noted.

 

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.