Motilal Oswal has reiterated 'Sell' ratings on two stocks with significant downside potential. According to the brokerage report, Tata Technologies from the Tata Group faces a 21% downside with a target price of ₹600, while India Cements from the Aditya Birla Group could decline by 15% with a target price of ₹350. Both stocks belong to well-known Indian business groups, highlighting the brokerage's cautious stance despite improving business performance.
Motilal Oswal noted that Tata Technologies has started FY27 on a stronger footing with revenue growing 4.3% quarter-on-quarter in constant currency terms. Management has maintained guidance of delivering strong double-digit organic growth during FY27 as recently won projects begin contributing over the coming quarters. However, the brokerage highlighted that execution will remain the biggest factor to watch, stating that "FY27 has started on a stronger note, but execution over the next few quarters will be key." The company's improving order book includes large project wins, including the USD 100 million Tenneco engagement, along with new business from Japanese automobile manufacturers and industrial equipment companies.
Motilal Oswal expressed concerns about Tata Technologies' valuation at 38x 12M forward P/E*, viewing it as premium relative to its growth and peers. The brokerage noted that although margins are improving, they are expected to expand gradually due to annual wage hikes, transition costs and investments in new projects. According to the report, much of the expected recovery has already been factored into the share price, limiting further upside even if business execution improves. The current valuation leaves little margin for error, as per Motilal Oswal's assessment.
Motilal Oswal noted that India Cements has reported better profitability over recent quarters as operational efficiencies continue to improve. The company has undertaken several initiatives including plant upgrades, process optimization, higher use of renewable energy and cost synergies following its integration with UltraTech Cement. The brokerage increased its earnings estimates, raising EBITDA estimates for FY27/FY28 by ~13%/3% factoring in better margins led by higher cost benefits. India Cements plans to expand its grinding capacity by 2.8 million tonnes per annum, while EBITDA is expected to grow strongly over FY26-FY28.
According to Motilal Oswal, the current valuation already reflects most of the improvements expected from both companies. For India Cements, the brokerage noted that the current valuation at 16x FY28E EV/EBITDA prices in most of the operational improvements due to the transition, hence limiting any further scope of re-rating. Despite India Cements delivering 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.
