Tech Mahindra Stock Call: Nomura, CLSA bullish after Q2 results; Jefferies, Morgan Stanley urge caution
Brokerages were selectively optimistic on Tech Mahindra following the IT major’s Q2 results, with most acknowledging progress in its three-year turnaround plan but differing on the stock’s re-rating potential. Nomura and CLSA see improving earnings visibility and margin traction as reasons to be positive; Jefferies and Morgan Stanley were cautious, citing lingering growth concerns and execution challenges.
Tech Mahindra’s Q2 FY26 financial results showed year-on-year profit decline on a high base but sequential improvement and continued margin progress. The firm reported Q2 FY26 consolidated net profit of Rs 1,195 crore (down 4.5 percent YoY due to the absence of last year’s exceptional gain), revenue from operations of Rs 13,995 crore (up 5.1 percent YoY).Nomura has a ‘buy’ rating on Tech Mahindra stock with a target price of Rs 1,670 per share, calling the Q2 FY26 performance “a good show on most parameters.” The brokerage noted that deal wins and a strong pipeline support expectations of better revenue growth in FY26 versus FY25. “Business repair is underway,” it said, adding that the company has made “good progress at the midpoint” of its three-year turnaround journey. Nomura said Tech Mahindra stock is trading at 18.3 times FY27 estimated earnings.
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CLSA also has a positive call with a ‘high-conviction outperform’ rating, but it trimmed its target price slightly to Rs 1,695. The brokerage pointed out that Tech Mahindra reported both a revenue and EBIT beat in Q2, with EBIT margins improving to 12.1 percent. It said the company’s FY27 margin target of 15 percent “looks achievable”, on the back of eight consecutive quarters of margin expansion. CLSA credited the management’s strong execution record but flagged that Tech Mahindra’s medium-term growth ambition compared to peers “remains unclear.”
Jefferies, however, struck a more cautious note with an ‘underperform’ rating and a target price of Rs 1,270. The brokerage said Q2 revenue and margin were broadly in line with expectations, but the company missed profit estimates due to foreign exchange losses. It said strong deal wins could aid the second half of FY26 but expressed doubts over a full-fledged recovery in FY27. Jefferies added that Tech Mahindra’s 15 percent margin target “appears optimistic” in light of muted top-line growth and wage cost pressures.
Morgan Stanley also presented a guarded outlook with an ‘underweight’ call and a target price of Rs 1,555. It said strong deal activity, client stability, and ongoing margin gains are positives. But it warned that weak deal conversion rates and a tough macro environment could make it difficult for the company to strike a balance between growth and profitability. Morgan Stanley said that Tech Mahindra stock trades at a 1.6 percent discount to HCLTech, rendering its risk-reward profile “less compelling.”
Tech Mahindra’s Q2 FY26 results showed progress on operational efficiency, with EBIT rising 33 percent year-on-year to Rs 1,699 crore. The company declared an interim dividend of Rs 15 per share and reported deal wins worth $816 million for the quarter. On Tuesday, the stock closed 1.2 percent higher at Rs 1,468.90 on the NSE ahead of the earnings announcement.
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