Tech Mahindra’s Telecom Comeback Triggers Rs 1,730 Target Price—Buy or Wai

Brokerage firm Elara Securities has retained its ‘Accumulate’ rating on Tech Mahindra (TECHM stock name) and raised the stock’s target price to Rs 1,730 from Rs 1,530, suggesting an 8% upside from the closing price of Rs 1,608 on July 16.

The upgrade follows signs of a turnaround in Tech Mahindra’s telecom business, which saw a 2.8% sequential revenue rise in the April–June quarter—its first major recovery in several quarters.

“TECHM continues to impress with quality client additions. It has added 13 must-have clients in Q1FY26 (45 such clients added in FY25). Most of them are Fortune-500 clients. Recovery in Telecom is encouraging, after many quarters of a decline. Telecom may have been helped by CC tailwinds, but adjusted for that also, the trend is encouraging,” stated Elara in its brokerage report.

Elara Capital reckons that this rebound, particularly in the US market, is a key driver behind the revised valuation. They added that recent policy changes in the US, including the ‘Big Beautiful Bill’, may have improved the business climate for telecom clients.

“In Telecom, TECHM is seeing a broad-based recovery, including stabilizing business from top clients in the US market, but durability of this trend is the key here. TECHM is seeking to narrow the gap with peers on FY26 revenue growth, even as it seeks to accelerate growth thereon,” the report added. The brokerage firm note that while the recovery is promising, the firm noted that its durability will need to be watched in the coming quarters.

Another reason for the more optimistic view is the improvement in operating margins. Tech Mahindra's EBIT margin rose by 60 basis points to 11.1% in the first quarter, bolstered by its cost-efficiency programme, Project Fortius. The initiative focused on reducing subcontractor costs, increasing offshoring, and improving internal efficiencies.

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“We have largely retained our revenue estimates as we expect growth to recover in FY27. We expect a 15% EBIT margin in FY27E (similar to the guidance) with a 30% earnings CAGR in FY25-27E

The brokerage also pointed to healthy deal momentum. The company reported new deal wins worth $809 million in Q1, up over 50% from the same period last year. It also added 13 key clients during the quarter, many of them from the Fortune 500 list.

Meanwhile, Elara projects Tech Mahindra’s earnings to grow at a 30% CAGR between FY25 and FY27. Despite the recent run-up in the stock, it believes valuations remain reasonable at 19.5 times FY27 earnings, as per the research report.

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