Explained - Why 50% analysts tracking this Tata Group stock say 'sell' despite a strong Q1

Shares of Tata Technologies Ltd. are in focus on Monday, July 20, as they react to a strong quarterly performance during the April-June period. However, 50% of the 18 analysts who have coverage on the Tata Group stock, have a "sell" rating on it.

Tata Technologies reported a 4.3% sequential growth in constant currency terms on the topline front. On a year-on-year basis, the same metric grew by 25%.

Margins for the quarter were also maintained at 16.1% during the June quarter, compared to 16% in March.

Tata Tech said it is well-positioned to deliver strong double-digit organic revenue growth in the financial year 2027.

The company's revenue in dollar terms increased to $175.4 crore in the first quarter, up 2.7% sequentially from $170.8 crore.

Its rupee revenue increased to ₹1,664.5 crore in the first quarter from ₹1,572.2 crore in the previous one.

On another note, Tata Tech recently secured a $100 million strategic partnership with Tenneco, a leading Japanese automotive original equipment manufacturer (OEM), where the company has been selected for a full vehicle engineering programme.

It said the engagement will help leverage India's engineering talent and accelerate innovation and help and help Tenneco respond more quickly to the evolving market requirements globally.

Why Is JPMorgan Bearish On Tata Technologies?

Brokerage firm JPMorgan has an "underweight" rating on Tata Tech with a price target of ₹540 per share, indicating a downside of 29% from its previous close.

The brokerage remains "underweight" on the stock as it has already rallied 28% since early May compared to the Nifty 50 index remaining flat and as a result of this upmove, Tata Tech's valuations look rich at 38 times and 33 times its estimated FY27 and financial year 2028 price-to-earnings.

It said the company's first quarter earnings were a beat on revenues, but missed on the margin front, adding that the growth seen during the quarter was due to a ramp-up in deals.

JPMorgan added that the management reiterated its guidance of double-digit organic CC revenue growth in FY27 on the back of deal ramp ups and strong pipeline.

However, it did highlight headwinds in the German market as certain clients undergo restructuring and optimization, JPMorgan said.

Kotak Institutional Equities Says "Sell"

Kotak has also maintained its "sell" rating on the Tata Group stock with a price target of ₹500, which is also the IPO price for the stock.

It said that Tata Tech has been a beneficiary of resumption of spends on existing products by auto OEMs, following a pause to invest in electrification.

Even as it raised its financial year 2028-2029 Earnings Per Share (EPS) estimates by 1%, it said that at 32 times its financial year 2028 estimated price-to-earnings, the stock is trading at a 20% to 60% premium to KPIT Tech and Tata Elxsi.

Of the 17 analysts who have coverage on the Tata Tech stock, four have a "buy" rating, five have a "hold" rating and nine have a "sell" rating.

Tata Tech shares ended the previous session 1.03% lower at ₹757.7 apiece. The stock has gained 17.6% this year, so far.

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