Buy Tata Technologies, target price Rs 1,150: JM Financial

JM Financial has a buy call on Tata Technologies with a target price of Rs 1150. The current market price of Tata Technologies is Rs 813.3. The time period given by analyst is year when Tata Technologies price can reach the defined target.

Tata Technologies, incorporated in 1994, is a Small Cap company with a market cap of Rs 33045.76 crore, operating in the IT Software sector.

Tata Technologies' key products/revenue segments include Software Services, Software Products and Other Operating Revenue for the year ending 31-Mar-2024.


Financials
For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 1345.00 crore, up 2.45% from last quarter Total Income of Rs 1312.88 crore and up 1.88% from last year same quarter Total Income of Rs 1320.14 crore. The company has reported net profit after tax of Rs 168.14 crore in the latest quarter.

The company's top management includes Mr.Ajoyendra Mukherjee, Mr.Warren Kevin Harris, Mr.Pathamadai Balachandran Balaji, Mr.Shailesh Chandra, Mr.Nagaraj Ijari, Ms.Aarthi Sivanandh, Ms.Usha Sangwan. Company has BSR & Co. LLP as its auditors. As on 31-12-2024, the company has a total of 41 crore shares outstanding.

Investment Rationale
Tata Technologies 3Q performance was encouraging. Revenues grew 1.7% cc QoQ, above J-M-F estimates: 0.3%. EBIT margin declined less than anticipated. PAT, aided by contributions from BMW JV, saw healthy sequential growth (7%). This performance, given the environment, underscores the value of Tata Tech's diversified offerings. Seasonal softness in Services was offset by seasonal uptick in product business. Within Services, challenges is Auto (-1% QoQ; USD) was made up by strong growth in Aerospace (+39% QoQ). Within Auto, sustained pressure on product engineering was eased by better demand of digital engineering services.

The broad offerings across verticals (Auto/Aero), services (PE/DES) and propulsion engines (ICE/EV/Hybrid) will hold Tata Tech in good stead going ahead as well. Demand environment is still far from conducive. Clients' budgets will likely balance new development vs. cost efficiency, EV/Hybrid vs. ICE and SDV vs. mechatronics. Tata Tech seems well positioned to capture demand in varying scenarios, limiting significant fluctuations to its performance. Besides, regulatory clarity could help revive spend cycles. Demand could, per the management, bottom in two quarters' time. The 1-3% EPS upgrade by JM Financial, admittedly the first since initiation suggests earnings have likely bottomed now. At 34x FY27E EPS, lowest since listing, the stock too has bottomed. The rating is BUY.

Promoter/FII Holdings
Promoters held 55.22 per cent stake in the company as of 31-Dec-2024, while FIIs owned 3.09 per cent, DIIs 2.73 per cent.