Tata Technologies shares rally 4% post Q1 results; should you buy, hold or sell?

Shares of Tata Technologies Ltd (Tata Tech) climbed over 4 per cent in Tuesday's trade, following a positive commentary by the management post June quarter results. The IT firm reported better-than-feared revenue, but analysts said optimistic commentary is yet to reflect in quarterly numbers. 

Tata Technologies revenue declined 7.6 per cent QoQ constant currency (CC) terms in its core services segment. Growth was impacted as OEMs delayed ramp-ups and paused R&D spends amid tariff-led challenges. The management is optimistic of a recovery from Q2 on the back of a healthy order book (OB) at end-Q1. 

"Even with the envisaged recovery from next quarter, FY26 growth would likely be weak growth year, in our view. In contrast to management’s double-digit revenue growth aspiration, we model a 1.5 per cent YoY dollar dip in FY26. Tata Tech aims to maintain its FY26 EBIT margin akin to FY25; a tall order, in our view, given the feeble revenue growth. We continue to value Tata Tech at 25 times on Q3FY27E to Q2FY28E EPS of Rs 20 to arrive at a targe of Rs 510. We maintain Sell given rich valuations and the slow recovery from challenges in the automotive segment," ICICI Securities said.

A weak quarter and a still uncertain macro notwithstanding, the Tata Tech management was surprisingly upbeat on near-term outlook, said JM Financial. The stock rose 3.52 per cent to hit a high of Rs 742 on BSE.

"Improved deal wins - six large deals, best in past six quarters - especially towards second half of Q1, underpins the confidence. It believes that the current delays/pauses of on-going OEM programs are tactical (read temporary) in nature and should resume as clarity emerges. No project cancellations thus far underscore their assertion," the brokerage said as it cut FY26-28 EPS estimates by 1-3 per cent, driven largely by 25-75bps cut in margin assumptions. 

"Multiples will track top-line growth, which is looking up. We therefore maintain BUY with a revised target of Rs 790 (from 780)," it said. 

PL Capital retained its 'Sell' call on the stock as it kept its margin estimates broadly unchanged, while baking in revenue decline of 3 per cent and 1.2 per cent for Service/consolidated business in FY26E, followed by 11.5 per cent growth in FY27E for both Service/Consolidated business.

"We are assigning 28x PE to FY27E, translating a target of Rs 570 and maintain our SELL rating," it said.