The stock market moves based on several factors, including global developments, crude oil prices, earnings, and company-specific news.
The domestic brokerage house Motilal Oswal has reiterated ‘Sell’ ratings on two stocks. As per this brokerage report, one stock has a downside potential of around 21%, while the other could decline by nearly 15% from the current market price.
Interestingly, both stocks belong to two of India’s well-known business groups. One is Tata Technologies from the Tata Group, while the other is India Cements from the Aditya Birla Group.
What is Motilal Oswal’s outlook on these two stocks? Let’s take a look at investment rationale offered by the brokerage house –
Tata Technologies: Better growth, but valuations a concern
Motilal Oswal has reiterated a ‘Sell’ rating on Tata Technologies with a target price of Rs 600. This implies a downside of nearly 21% from the current market price.
According to the Motilal Oswal report, the company has started FY27 on a stronger footing. Revenue grew 4.3% quarter-on-quarter in constant currency terms.
Management has also maintained its guidance of delivering strong double-digit organic growth during FY27 as recently won projects begin contributing over the coming quarters.
However, Motilal Oswal believes execution will remain the biggest factor to watch.
The brokerage said, “FY27 has started on a stronger note, but execution over the next few quarters will be key.”
Another area the brokerage highlighted is the company’s improving order book. Large project wins, including the USD 100 million Tenneco engagement, along with new business from Japanese automobile manufacturers and industrial equipment companies, are expected to improve revenue visibility gradually.
Motilal Oswal on Tata Tech’s valuation
Motilal Oswal noted, “At 38x 12M forward P/E, we view Tata Technologies valuations as premium relative to its growth and peers.”
The brokerage added that although margins are improving, they are expected to expand gradually because of annual wage hikes, transition costs and investments in new projects.
It further said, “Current valuation leaves little margin for error.”
As per Motilal Oswal report, much of the expected recovery has already been factored into the share price, limiting further upside even if business execution improves.
India Cements: Operational improvement but upside limited
Motilal Oswal has also retained its ‘Sell’ rating on India Cements with a target price of Rs 350, indicating a downside of around 15%.
The brokerage house report noted that the company has reported better profitability over the last few quarters as operational efficiencies continue to improve.
India Cements has undertaken several initiatives, including plant upgrades, process optimisation, higher use of renewable energy and cost synergies following its integration with UltraTech Cement, an Aditya Birla Group company.
The brokerage has also increased its earnings estimates after factoring in better margins.
Motilal Oswal said, “We have raised our EBITDA estimates for FY27/FY28 by ~13%/3%, factoring in better margins, led by higher cost benefits.”
The company also plans to expand its grinding capacity by 2.8 million tonnes per annum, while earnings before interest, taxes, depreciation and amortisation (EBITDA) are expected to grow strongly over FY26-FY28.
India Cements: Why the ‘Sell’ rating?
According to the Motilal Oswal report, the current valuation already reflects most of these improvements.
Motilal Oswal noted, “We believe the current valuation at 16x FY28E EV/EBITDA prices in most of operational improvements, which are expected due to this transition, and hence limit any further scope of re-rating.”
The brokerage also reiterated, “Maintain Sell.”
Although India Cements delivered better operating performance during the June quarter, Motilal Oswal believes investors may have already priced in much of the expected turnaround, leaving limited room for further gains at current valuations.
Conclusion
For both the companies, Tata Tech and India Cements, Motilal Oswal raised concerns with regards to valuations. The brokerage house believes that at current levels, the valuation reflects most of the positives. They see limited scope for further re-rating
Disclaimer: The stock recommendations, target prices, and market analysis presented in this article are solely those of the brokerage firm, Motilal Oswal, and do not reflect the views or positions of Financial Express. This content is intended strictly for informational and educational purposes and does not constitute an offer, solicitation, or personal advice to buy, sell, or hold any financial security. Stock market investments are subject to inherent market risks, volatility, and uncertainty. Readers are strongly advised to evaluate their risk profile and consult a SEBI-registered investment advisor before making any financial or investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.
