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HomeMarket NewsTech Mahindra shares surge but Citi says 'sell', highlights key re-rating triggers
Tech Mahindra shares surged over 4% despite Citi's 'sell' rating with a ₹1,260 target. CLSA kept an 'Outperform' rating with a ₹1,698 target. The stock hit ₹1,404.70 intraday high.
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Shares of Tech Mahindra Ltd surged over 4% on Wednesday, March 18, even as Citi maintained a cautious stance on the stock, reiterating a ‘sell’ rating.
The brokerage set a target price of ₹1,260 for the stock, implying a near 10% downside to the current trading price of about ₹1,400.
In a recent note following a management interaction, Citi said the company remains focused on delivering better-than-industry growth and achieving a 15% EBIT margin by FY27, in line with its earlier guidance.
However, the brokerage highlighted that macro uncertainties, stemming from the tensions in West Asia, and the evolving AI-related trends remain key factors to watch in the near to medium term.
Also read: Persistent Systems, Coforge are CLSA's top IT sector picks for up to 78% upside
Citi acknowledged that Tech Mahindra has executed well in recent quarters, but flagged valuation concerns.
The brokerage noted that the stock is trading at around 18 times FY27 estimated earnings, which is at a premium to almost all its large-cap IT peers.
For instance, Tata Consultancy Services (TCS) and Infosystrade at around 16x, while Wipro is valued at about 14x.
Contrary to CITI's view, brokerage firm CLSA has retained an 'Outperform' rating on Tech Mahindra, setting a target price of ₹1,698, flagging over 21% upside to the current trading price of about ₹1,400/share.
According to Bloomberg data, a majority of brokerages remain positive on the stock, with 30 of 46 analysts rating it a ‘buy’, while 11 have a ‘sell’ recommendation and five recommend holding the stock.
Citi said that for the stock to sustain its outperformance, Tech Mahindra will need to deliver growth that is consistently ahead of the industry.
Despite a cautious view from Citi, the stock gained 4.69%, hitting intraday highs of ₹1,404.70.
As of 11.51 am, the stock was trading 4.36% up at ₹1,400.30, only 15.78% above its 52-week low of ₹1,209.40.
The shares have lost nearly 7% over the last month.
