Tata Tech shares dip 5% as brokerages reduce target prices. Should you buy?

The company had closed a total of 12 large deals in FY24, which included one $50 million plus deal and five deals in the $15 to $25 million range. Its customer pyramid continued to improve with 2 added in the $10-50 million category, 2 in the $5-10 million category, and 3 in the $1-5 million category.

Tata companies are known to be a safe investment basket, however, the Q4FY24 results have triggered a mixed sentiment among the brokerages. Here’s what brokerages say:

JP Morgan

JP Morgan remains neutral on the stock as the revenues beat the estimates however, margins were in line which would also likely be maintained in FY25. Vinfast might bottom out in Q1 and a weak exit may be a challenge for FY25 growth.

The global brokerage maintained an ‘underweight’ rating for the stock with a target of Rs 800.

Kotak Institutional Equities

KIE emphasizes that Tata Tech reported revenues and margins in line with estimates and revenue growth was primarily driven by the lumpy education business.

Ramp-down of the Vinfast account impacted services segment revenues but was offset by strong growth in anchor clients. The company has higher exposure to mechanical engineering services and is building muscle in embedded software. Kotak also added that expensive valuations keeps them cautious.

KIE has a ‘sell’ view on the stock with a target price of Rs 700.

Bank Of America

BofA stated that Q4 was a miss on the headline but there seems to be a solid breadth of growth, which is expected to reaccelerate in FY25 as the current pace of EV adoption is decent and not a major concern for the company.

Further, there are a few tailwinds in the ER&D that could help. As per the brokerage firm, FY25 prospects are likely to drive stock returns. BofA maintains a ‘buy’ rating on the stock with a target price of Rs 1,250.

JM Financial

JM Financial stated that Tata Tech reported 0.3% cc QoQ revenue growth, which met expectations. Ramp down in Vinfast had dragged services which were anticipated.

ExVinfast services growth was an impressive 10.4% QoQ, which was broad-based across anchor/non-anchor clients. This is on top of 30% CAGR in Services’ USD revenues over FY21-23.

These reflect the diversity and resilience of Tata Tech’s portfolio.

Further, BMW and Aerospace deals are only going to add further impetus. The brokerage believes that the expectations of a better FY25 is not unreasonable.

JM Financial rolled its target price forward to Rs1,410 (from Rs 1,370) with a ‘buy’ rating on the stock.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)