Tata Technologies shares: Down 10% this year, can the Tata Group stock reward long-term investors?

Shares of Tata Technologies, the Tata Group’s global engineering services firm, are down 10% this year. Tata Technologies shares, which hit their all-time high on listing day last year have been trading below that level till date. The stock listed at Rs 1,200, a premium of 140 per cent, over its issue price Rs 500 on November 30. It touched a high of Rs 1,400 in the same session.

However, the stock is down 24% from record high till date. In the current session, the Tata Technologies stock was trading at Rs 1,067, up 1.20% against the previous close of Rs 1056.60 on BSE.

Total 0.52 lakh shares of the firm changed hands amounting to a turnover of Rs 5.83 crore. Market cap of the firm rose to Rs 43,365 crore on BSE. 

In terms of technicals, the relative strength index (RSI) of Tata Technologies stands at 57.4, signaling it's trading neither in the overbought nor in the overtrading zone. Tata Technologies shares are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day and 150 day moving averages.

ICICI Securities has a Buy call on the stock with price target of Rs 1,290 on 1-year forward PE of 56x (in line with lifetime median/average PE).

Key risks for the stocki are under-penetration in Europe and other verticals being unable to adequately compensate for VinFast’s ramp-down.

After attending Tata Technologies analyst meet, the brokerage kept its price target unchanged.

The demonstration by the firm showed Tata Tech’s prowess in :1) ICE to EV conversion, 2) SDV, 3) smart manufacturing, 4) plant engineering, 5) robotics, 6) AI implementation and 7) battery solutions. Special emphasis has been put on deepening partnership with OEM ecosystem stakeholders to speed up the transition to software/ SDV portfolio. It has also added marquee names to client roster to limit the downside from VinFast ramp-down (in EV, semiconductor, manufacturing domain).

JM Financial finds Tata Technologies the cheapest among the three auto-focused ER&D players in terms of valuations -- the other two being KPIT Technologies and Tata Elxsi.

“With Vinfast (customer) decline behind and new deal ramps in BMW-JV and Agratas ahead, JM Financial believes the current Tata Technologies levels offer a good entry point to play the broadening total addressable market (TAM) led growth narrative,” said JM Financial.

The brokerage suggested a 'Buy’ call on Tata Tech with a price target of Rs 1,250. Tata Tech's FY24 services growth, excluding its top-3 clients, stood at 37 per cent, which JM Financial said reflected revenue diversification.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart finds resistance for the Tata Group stock at Rs 1,150- Rs 1,200. It sees support for the stock at Rs 950.

“Tata Tech is bottoming out from the lower levels with strong volume on the daily charts. It is trading above its all-important moving averages. The stock is supported by a sector tailwind and bullish momentum indicators. MACD is supporting the current strength whereas momentum indicator RSI is also positively poised,”  said Gaur.

“The pattern suggests an immediate target of Rs 1,150, while it has the potential to move further upside till Rs 1,200 levels. On the downside, Rs 950 will act as an immediate support level,” added Gaur.

Kiran Jani, analyst at Jainam Securities is bullish on Tata Technologies. The analyst has a price target of Rs 1200. The revised target reflects his confidence in the company’s strong growth prospects, robust financial performance, and strategic positioning within the technology and engineering sectors.