Tata Technologies reported QoQ USD growth of 3.9%, outperforming our optimistic estimate of 1.9%. This marks the company's best growth since VinFast's rampdown in FY24.
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Tata Technologies Ltd.'s growth bounced back (3.9% QoQ USD) after nine consecutive quarters of sluggish growth, driven by technologies segment (up 7.6%) and aerospace and IHM led traction in services segment (up 2.8%).
Growth in automotives turned slightly positive at 0.3%, post three quarters of sequential decline. Management pointed to early signs of demand returning in automotives, as clients adjust to the new normal, amid policy changes and impact from tariffs.
However, management expects weakness in Q3 FY26, impacted by issues from the JLR account and weak seasonality. Margins are expected to be weak from upcoming wage hikes.
Maintenance of this growth momentum, especially in the services segment, could instil confidence of a turnaround.
Maintain Sell with an unchanged target P/E of 25x and an unchanged target price of Rs 510.
We revise our FY26-27E EPS by -1.3%/-1.6% on lower margins. We have built in a full quarter consolidation of ES Tech with $10.4 million quarterly revenue leading to revenue growth.
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