Prabhudas Lilladher Maintains Hold Rating on Tata Technologies with Target Price of ₹660

Tata Technologies has received a Hold rating from Prabhudas Lilladher with a target price of ₹660, as the brokerage highlighted mixed performance indicators and sector-specific challenges facing the engineering services company.

Revenue Performance Exceeds Expectations

The company delivered stronger-than-anticipated revenue growth in the latest quarter, with performance metrics showing encouraging trends across key business segments.

Performance Metric	Actual	Estimate	Variance
Revenue Growth (CC QoQ)	+2.30%	+0.60%	Outperformed
Non-Auto Service Growth	+8.00% QoQ	-	Strong momentum
Organic Service Business	+1.00% QoQ CC	-	Positive growth
Organic Auto Business	-4% to -5% QoQ CC	-	Decline

The outperformance was primarily attributed to strong growth in non-Auto services and a lower than anticipated ramp-down in the anchor account, which helped offset weakness in other areas.

Aerospace Segment Shows Strong Growth Trajectory

The aerospace division continues to demonstrate robust progress, with management highlighting significant developments in this high-potential segment. The engagement within aerospace is progressing well and moving upstream to more complex engineering activities. Management anticipates the aerospace segment to generate $40 million in revenue by FY26, representing a substantial growth opportunity for the company.

The continued momentum in aerospace and Industrial Heavy Machinery (IHM), along with securing large programs for full-vehicle development, provides confidence for future growth prospects.

Management Outlook and Growth Projections

Management expressed confidence in reversing Q3 weakness and delivering double-digit growth in Q4, supported by several key factors:

Stabilizing operations of the anchor account
Ramp-up in automotive programs signed during Q3
Early signs of spending recovery among automotive OEMs
Strong progress in the BMW joint venture with 1000+ employees deployed

For the medium term, management expects to drive double-digit organic growth in FY27, backed by continued aerospace momentum and automotive sector recovery.

Revised Financial Estimates and Concerns

Prabhudas Lilladher has updated its organic growth projections while expressing caution about certain risk factors.

Financial Projections	Revised	Previous
FY27 Organic Growth	8.50% YoY CC	7.50% YoY CC
FY28 Organic Growth	11.90% YoY CC	12.90% YoY CC
EBIT Margin Revision	-40 bps each FY27E/FY28E	-

The brokerage has reduced EBIT margin estimates by 40 basis points each for FY27E and FY28E due to higher depreciation and amortization from ES-Tec integration. Key risk factors identified include the high base effect in Q4, lumpiness in technology solutions, and uncertainty around automotive sector recovery timing.

Investment Recommendation

Prabhudas Lilladher maintains its Hold rating on Tata Technologies, assigning a 27x multiple to FY28E EPS, which translates to a target price of ₹660. While the company shows promise in aerospace and has demonstrated revenue resilience, the mixed automotive sector outlook and margin pressure from integration costs warrant a cautious approach.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-2.10%	-0.80%	-1.03%	-9.13%	-20.31%	-50.69%

Tata Technologies has outlined its strategic growth plans during a recent conference call, highlighting key developments that will drive future performance across multiple business segments.

ES-TEC Acquisition Impact

The company announced that contributions from ES-TEC will provide additional momentum for FY27 growth. This acquisition is positioned to enhance Tata Technologies' capabilities and expand its market presence, though specific financial details regarding the expected contribution were not disclosed during the conference call.

Aerospace Sector Growth Projections

Tata Technologies has set ambitious targets for its aerospace division, with revenue anticipated to reach nearly $40 million by FY26. This projection represents a significant milestone in the company's sectoral diversification strategy.

Business Segment:	Target/Timeline
Aerospace Revenue:	Nearly $40 million by FY26
ES-TEC Contribution:	Additional growth driver for FY27

Strategic Business Expansion

The dual announcements reflect Tata Technologies' multi-pronged approach to growth, combining organic expansion in high-potential sectors like aerospace with strategic acquisitions such as ES-TEC. The aerospace sector target of $40 million by FY26 indicates the company's confidence in this vertical's growth potential and its ability to capture market opportunities.

The ES-TEC acquisition appears strategically timed to complement existing operations while providing additional revenue streams for FY27, suggesting a phased approach to integrating new capabilities into the company's portfolio.