Prabhudas Lilladher has raised its price target for Tech Mahindra to INR 1,910 after the company posted better-than-expected second-quarter results. Revenue grew 2.4% in constant currency terms, supported by strong deal wins totaling USD 1.02 billion. Investors are now monitoring how the company’s internal efficiency program, Project Fortius, continues to support profit margins against rising costs for AI investments.
Tech Mahindra saw its price target adjusted to INR 1,910 by brokerage firm Prabhudas Lilladher, following a second-quarter financial performance that exceeded market expectations. The IT services company reported constant currency revenue growth of 2.4% for the quarter, outperforming initial projections of 1.2%. Profitability also improved, with EBIT margins rising by 40 basis points to reach 14.8%.
The company credited this performance largely to Project Fortius, an internal efficiency program aimed at improving operating margins. This initiative has helped the company absorb wage hikes that have recently affected the broader IT services sector. By focusing on cost management and streamlined operations, the company was able to protect its margins despite inflationary pressures on talent costs.
Revenue contributions were uneven across different business divisions. The communication segment grew 5.8% quarter-on-quarter, driven by the successful implementation of large contracts. Similarly, the retail and logistics vertical performed well, recording 9.5% growth. However, the manufacturing division saw a 3.8% decline, which the management described as a normalization after a period of rapid execution on a significant European automotive project in the previous quarter.
Total deal wins for the quarter reached USD 1.02 billion, with the last twelve months' total reaching USD 4.27 billion. This represents a 34.8% increase year-on-year, providing clearer visibility into future revenue for the coming quarters.
Looking ahead, the company expects operating efficiency to continue supporting margins in the second half of the year. However, investors may want to track how these gains balance against ongoing expenses related to artificial intelligence capabilities and the acquisition of specialized talent. While the brokerage raised its revenue growth estimates for the fiscal years 2027 and 2028 to 7.0% and 5.8% respectively, sustained margin improvement will likely depend on how effectively the company executes its remaining order book and manages costs in a competitive talent market. Seasonality in the Comviva business is also expected to influence performance in the coming quarters, which will be a key factor for stakeholders to monitor.