Tata Technologies (TATATECH IN) – Q4FY26 Result Update – Strong Q4 exit & improved FY27 visibility – Downgrade to ‘HOLD’

TATATECH reported strong Q4 revenue growth of 12.4% QoQ CC, ahead of our estimate of 8.2%, driven by robust organic Services growth of ~8% QoQ CC. Within Services, the auto segment grew 13.2% QoQ, supported by higher ES-Tec contribution (additional two months of consolidation in Q4), normalization in anchor client, and strong traction in non-anchor accounts. The non-auto segment sustained momentum in Q4, Aerospace vertical reaching an annualized run-rate of ~US$ 40mn. The strong Q4 exit, coupled with improving deal signing activities (two strategic full-vehicle programs won in Q4 and two additional wins closed in April 2026) provides confidence to the management in delivering double-digit organic Services revenue growth in FY27. Considering this, we raise our FY27E consolidated revenue growth estimate (organic + inorganic) to 15.6% (earlier 14.1%), while lowering FY28E to 10.1% (earlier 11.9%) due to base effect. On the margin front, management expects improved operating performance supported by volume-led operating leverage, a better offshore mix and pyramid, and AI-led productivity gains. We have largely factored these into our estimates and hence maintain our reported EBIT margin estimates at 14.1% and 15.0% for FY27E and FY28E, respectively. However, we lower our net other income estimates due to higher finance costs on the US$60mn loan availed for the ES-Tec acquisition and lower contribution from the BMW JV following a miss in Q4FY26, resulting in an EPS cut of ~8% and ~9% for FY27E and FY28E, respectively. We assign a PE multiple of 25x to FY28E earnings, arriving at a target price of INR 560, and downgrade the stock to HOLD (BUY earlier).