Tata Tech Share Price Drop by 5% on Weak Q4 Earnings

On 6-May, Tata Technologies share price dropped by 5% following the announcement of disappointing results for the January-March quarter, which left investors underwhelmed. As of 09.55 am IST, Tata Technologies' shares were priced at ₹1,041.80 each on the National Stock Exchange (NSE).

Tata Technologies maintained a stable operational performance with an EBITDA margin of 18.4% in Q4. Looking forward, JM Financial has revised its constant currency revenue growth forecasts for Tata Tech's services segment down to 11%-15% for FY25-26. The brokerage explained that the reduction in growth expectations for FY25 is due to the continuing decline from Vinfast in Q1 and a slightly weaker performance at year-end than previously anticipated. Additionally, JM Financial has adjusted its margin predictions for FY25 and FY26 downwards by 60 basis points each, reflecting management's expectations for a steady outlook.

Despite the challenges with the Vinfast account, JM Financial is optimistic about the growth prospects for Tata Technologies, supported by a more diversified portfolio than in previous years. The brokerage believes that strong performance in other areas, such as the BMW account, aerospace, and education sectors, will continue to drive the company's underlying momentum.

Tata Tech disclosed its quarterly earnings on May 3rd, reporting a net profit of ₹157.24 crore for the quarter ending March 2024, which represents a 27% decrease compared to the same period last year. Additionally, the company's consolidated revenue from operations for the quarter was ₹1,301.05 crore, marking a decline of 7.22% year-on-year.

In FY24, Tata Tech successfully closed a total of 12 large deals, which included one deal exceeding $50 million and five deals ranging between $15 to $25 million. The structure of the company's customer base saw improvement, with the addition of two customers in the $10-50 million range, two in the $5-10 million range, and three in the $1-5 million range.

While Tata companies are typically regarded as a secure group of investments, the Q4FY24 results from Tata Tech have elicited mixed reactions from financial analysts. JP Morgan has chosen to maintain its "Underweight" rating on the stock, setting a target price of ₹800. The brokerage acknowledged that the company's revenue for the March quarter exceeded its expectations and that margins aligned with predictions. Analysts from JP Morgan anticipate that these margins will be maintained throughout the fiscal year ending March 2025.

Kotak Securities has kept its "Sell" rating for the stock, with a price target of ₹700. The brokerage noted that the company's revenue and margins for the quarter met its expectations. However, Kotak Securities remains cautious, citing that the valuations of the company still appear to be high.

BofA Securities continues to hold a positive outlook on the stock, maintaining a "Buy" rating with a target price of ₹1,250. The analysts highlighted that the favorable conditions in the Engineering Research & Development (ER&D) sector, along with the outlook for FY25, are likely to propel the stock forward.