Tata Technologies share price gets supercharged: still a buy?

Tata Technologies share price has staged a strong comeback lately as investors rushed to buy the company’s dip. The stock has risen for four straight weeks, reaching a high of ₹1,115, its highest point since April 8th of this year. It has soared by over 13% from its lowest point this year.

Still, despite the rebound, the stock remains significantly lower than its all-time high of ₹1,385, which it moved to after its blockbuster initial public offering (IPO) in 2023, in which the company sold over 60 million shares at between ₹475 and ₹500 each. 

Tata Technologies is a top engineering firm

Tata Technologies is one of the many companies that belong to Tata Group, one of India’s top conglomerates. Initially started as Core Software Systems, the company became part of Tata Group in 1996.

It is an engineering company that offers solutions to firms in the automotive, industrial heavy machinery, and the aerospace sectors. Its top services include research and development (R&D), maintenance, repair, and overhaul (MRO), and other challenges. 

Global companies take advantage of India’s large talent pool and lower costs of doing business to use its services. This is an important part of its business now that many companies are considering moving to India, a country with over 1.4 billion people and the fastest-growing country in the emerging market.

The company also exists in an industry that is expected to continue growing: R&D. Data shows that companies spent over $1.8 trillion in R&D in 2022, a figure that is expected to grow to $2.7 trillion in 2026. Between 14% and 17% of these funds will be spent in India.

Additionally, the company offers other solutions like selling software and providing education solutions to many people in India. 

While Tata Motors and Electric Mobility are its anchor customers, the firm has been expanding its customer base in the past few years.

Tata Technologies business is doing well

There are signs that Tata Technologies is doing well as demand for R&D and engineering solutions rise. The most recent financial results showed that the company’s revenue came in at over ₹321 billion in FY21, mainly from its services segment. 

It then jumped to ₹473 billion in FY’22, ₹547 billion in FY’23 and ₹617 billion in the last financial year. The management believes that its growth story is still young and that it will continue doing well in the long term. 

Most notably, the company’s adjusted EBITDA has also continued soaring, reaching a high of ₹9.4 billion in the last financial year from ₹3.85 billion a year earlier. 

The most recent financial results showed that Tata Technologies revenue was largely flat in the last quarter to ₹12.96 billion or $154.76 million.

Its important service revenue fell by 1% to ₹9.8 billion while its net income rose by 3.1%. This performance was because of an issue the company had with VinFast, a large Vietnamese electric vehicle company. VinFast had an issue with the solutions that Tata Tech offered and delays in work.

This issue has now been sorted out and the company has moved ahead. In its quarterly results, Warren Harris, the CEO, said that businesses excluding VinFast was up by 26% on a year-on-year basis. As such, he expects that the business will continue doing well in the near term.

For example, the company was selected by a large vehicle manufacturer to deliver its battery design last quarter. It was also selected by a large vehicle company as the supplier of the software-defined vehicle (SDV) while another European brand selected it to develop its virtual platform environment.

Still, a key challenge for Tata Technologies is that the auto industry is seeing some softening as evidenced by the recent drop of some auto stocks like Stellantis, Ford, and General Motors. This sector is an important one since the company makes most of its money from vehicle manufacturers. Nonetheless, lower interest rates could lead to more vehicle sales.

Also, Warren Harris noted that the company is continuing the momentum in the current financial year, saying:

“The visibility that we’ve got across the sectors that we’re operating gives us confidence at this srage that momentum will continue along the calendar year 2024 and 2025. We are not seeing any drop in the demand environment.”

Tata Technologies share price analysis

Turning to the daily chart, we see that the Tata Tech stock price ha bounced back lately. This rebound happened after the stock fell to a record low of ₹973.25 in June. It also formed a double-bottom pattern at that level.

The stock also formed a falling wedge pattern and has now moved above it. It has also jumped above the 50-day moving average. Therefore, the stock will likely continue rising as bulls target the key resistance point at ₹1,167, its highest point in February.