Tata group stock trading at 29% discount; Is it a good time to buy?

SYNOPSIS: JPMorgan upgraded Tata Technologies to neutral, raised its target price, and lifted earnings estimates on improving auto R&D demand, while remaining cautious due to valuations and relatively slower growth.

During Wednesday’s trading session, shares of a global product engineering and digital services company and part of the Tata Group, surged nearly 6 percent on BSE, after a global brokerage firm JPMorgan upgraded the stock on the back of better demand expectations.

With a market cap of Rs. 27,730.5 crores, shares of Tata Technologies Limited closed in the green at Rs. 683.45 on BSE, up by more than 5 percent, as against its previous closing price of Rs. 648.9.

The stock has delivered negative returns of over 22 percent in one year, but has gained by around 5 percent in the last one month. Further, the stock is trading at a roughly 29 percent discount to its 52-week high of Rs. 912, recorded on 8 January 2025, calculated from its previous close.

Brokerage Target & Outlook

Tata Technologies Limited has received a more constructive view from JPMorgan, which upgraded the stock to ‘Neutral’ from ‘Underweight’ and raised its target price to Rs. 710 from Rs. 570 per share. The revision reflects expectations of a recovery in client-led R&D spending as recent trade agreements reduce tariff-related uncertainties in the global auto sector.

The brokerage has also increased its revenue projections for FY26-FY28 by 2-8 percent, alongside a 70-90 basis point upgrade in margin estimates. These changes translate into an Earnings per Share (EPS) upgrade of 2-6 percent, with about 2 percent driven by organic growth and the remainder factoring in contributions from the ES-Tec acquisition.

JPMorgan noted that the improvement in organic growth assumptions is largely supported by a pickup in automotive Engineering R&D demand, particularly in the European Union, which remains Tata Technologies’ largest market.

Commenting on the stock’s performance, the brokerage highlighted that Tata Technologies has underperformed in these months. However, with demand conditions improving, it believes earnings upgrades could follow, limiting further downside risk from current levels.

Valuation-wise, the stock now trades at around 34x earnings, broadly in line with KPIT Tech, despite KPIT offering stronger growth visibility. As a result, JPMorgan has maintained a neutral stance, while still increasing its price-to-earnings multiple assumption to 32x from 28x to account for the improved earnings outlook.

Within the broader Tata Group universe, Tata Technologies continues to feature among stocks with relatively cautious Street sentiment, alongside Tata Elxsi. JPMorgan has also raised Tata Elxsi’s target price to Rs. 4,800 from Rs. 4,000, reflecting selective optimism within the group.

Tata Technologies reported a marginal growth in revenue from operations, experiencing a year-on-year increase of around 2 percent, from Rs. 1,296 crores in Q2 FY25 to Rs. 1,323 crores in Q2 FY26. Likewise, its net profit increased during the same period from Rs. 157 crores to Rs. 166 crores, representing a rise of around 6 percent YoY. Tata Technologies Limited provides engineering and design services and digital transformation services to global manufacturing clients.

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