Tech Mahindra Reports Strong Q3 Results; Deven Choksey Sets Target at ₹1,805
Tech Mahindra delivered strong Q3 results with revenue of ₹1,43,932 million, up 8.3% YoY and exceeding estimates by 4.1%. EBIT surged 40.1% YoY to ₹18,919 million with margins expanding to 13.1% due to operational improvements and the Project 40s efficiency program. PAT declined 6.1% QoQ to ₹11,220 million due to a one-time provision of ₹2,724 million for wage code compliance. Both IT services and BPS segments showed positive growth. Deven Choksey set a target price of ₹1,805 but downgraded rating to "ACCUMULATE" citing recent stock price appreciation.
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Tech Mahindra has reported robust third-quarter financial results, demonstrating strong operational performance across key business segments. The IT services major exceeded analyst expectations with comprehensive growth metrics, though certain one-time provisions impacted overall profitability during the quarter.
Financial Performance Overview
The company's quarterly financial metrics showcase significant improvement across multiple parameters:
| Metric | Q3 Amount (₹ Million) | QoQ Growth | YoY Growth |
|---|---|---|---|
| Revenue | 1,43,932 | +2.8% | +8.3% |
| EBIT | 18,919 | +11.3% | +40.1% |
| EBIT Margin | 13.1% | - | - |
| PAT | 11,220 | -6.1% | +14.1% |
Revenue performance exceeded estimates by 4.1%, driven by broad-based growth across communications, manufacturing, and retail verticals. The European market contributed significantly with an impressive 11.2% year-on-year growth, highlighting the company's geographic diversification strategy.
Operational Efficiency and Margin Expansion
EBIT margin expansion to 13.1% reflects the company's focus on operational excellence and pricing discipline. The sequential improvement in EBIT was supported by several key factors including improved operating disciplines, strategic pricing approaches, and ongoing benefits from the Project 40s efficiency program. Fixed-price project productivity improvements, volume growth, and enhanced IT utilization contributed to margin expansion, with IT utilization reaching 86.6% during the quarter.
Segment-wise Performance
Both major business segments demonstrated positive growth momentum:
| Segment | Revenue (₹ Million) | QoQ Growth | Revenue Share |
|---|---|---|---|
| IT Services | 1,20,756 | +2.6% | ~84% |
| BPS | 23,176 | +4.0% | ~16% |
The IT services segment maintained its dominant position while the BPS segment showed stronger sequential growth, indicating balanced performance across the company's service portfolio.
Impact of Exceptional Provisions
PAT declined 6.1% quarter-on-quarter despite strong operational performance due to a one-time exceptional provision of ₹2,724 million (USD 30 million). This provision was made in accordance with new wage code notifications, representing a regulatory compliance measure rather than operational weakness.
Analyst Outlook and Valuation
Deven Choksey has established a target price of ₹1,805 based on December 2027 estimates, applying a 23.0x valuation multiple. However, the rating has been downgraded from "BUY" to "ACCUMULATE" at current levels, citing the sharp run-up in stock price. The valuation basis has been rolled forward to reflect updated long-term estimates, suggesting confidence in the company's fundamental trajectory while acknowledging current market pricing dynamics.
Historical Stock Returns for Mahindra & Mahindra
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.55% | -5.02% | -6.69% | +1.75% | +23.77% | +288.15% |
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