Amid macro uncertainties and earnings growth trajectory tapering off, brokerage firm Sharekhan has downgraded Tata Elxsi’s rating to ‘reduce’ with a target price of Rs 7,500, implying a downside of 3.6% from the current market price of Rs 7,778.
“Tata Elxsi has consistently proven its expertise and aims to capture market opportunities across key verticals and adjacencies, given its unique capabilities in design-led engineering, low-cost execution, and high offshore mix. However, macro uncertainties have led to management’s caution on near-term outlook, primarily led by softness in the media and communication vertical and expects some margin headwinds owing to higher hiring and back-to-office cost,” Sharekhan said in a report.
“We believe tapering of superior growth and lack of positive surprise levers would weigh on the premium valuation. The stock trades at 72.2x/71.2x/58.9 its FY2023E/FY2024E /FY2025E earnings. At the current juncture with macro uncertainties and earnings growth trajectory tapering off, we downgrade our rating on the stock to reduce from buy,” it added.
Profit before tax (PBT) of Tata Elxsi stood at Rs 219.17 crore, registering a fall of 4 per cent quarter on quarter (QoQ) while it rose 28 per cent year on year (YoY).
For the quarter ended September 30, the company reported Rs 763 crore of revenue from operations, growth of 5 per cent QoQ and 28 per cent YoY while profits after tax grew 39 per cent YoY. The company’s growth was primarily volume-led, with all three segments of EPD, IDV and SIS showing growth of 4, 14 and 26 per cent QoQ, respectively.
Transportation of the firm grew 4 per cent QoQ and 30 per cent YoY, aided by large deals in EV, ADAS and adjacencies in rail and offroad vehicles. Healthcare continued to witness strong growth of 8 per cent QoQ and 56 per cent YoY, driven by new product engineering and regulatory services.
Media and communications reported growth at 2.1 per cent QoQ and 22.2 per cent YoY, aided by platform-led deals and entry into new operator accounts.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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