Time period given by analyst is one year when Tata Elxsi Ltd. price can reach defined target.
Tata Elxsi Ltd., incorporated in the year 1989, is a Mid Cap company (having a market cap of Rs 36827.80 Crore) operating in IT Software sector.
Tata Elxsi Ltd. key Products/Revenue Segments include Software Development Charges and Traded Goods for the year ending 31-Mar-2021.
Financials
For the quarter ended 30-09-2021, the company reported a Standalone Total Income of Rs 597.76 Crore, up 3.81 % from last quarter Total Income of Rs 575.82 Crore and up 37.55 % from last year same quarter Total Income of Rs 434.59 Crore. Company reported net profit after tax of Rs 125.33 Crore in latest quarter.
Investment Rationale
The brokerage maintains REDUCE rating on TELX, based on diminishing margin of safety at 56x FY23E and following an in-line revenue performance. The margin came in better than expected, led by higher-than-expected offshoring (~75%), but the brokerage believes it has reached the peak level, considering supply-side concerns. While the brokerage remains positive on the company’s prospects and growth leadership in ER&D (+26/29% revenue/EPS CAGR over FY21-24E), the unfavourable risk-reward can be construed from (1) lower revenue growth in the IDV segment impacted by project completion and delay in decision making, (2) reducing growth premium vs. ER&D peers, and (3) diminishing margin due to supply-side challenges and increased hiring of freshers to manage attrition (13.9%). The near-term prospects remain strong with FY22E revenue growth expected at 32%, which would subsequently normalise to ~25% in FY23E. Its TP of INR 5,275 is based on 44x Dec-23E EPS, supported by an EPS CAGR of 29% over FY21-24E.
Promoter/FII Holdings
Promoters held 44.53 per cent stake in the company as of Dec 30, 2020, while FIIs held 12.62 per cent, DIIs 4.82 per cent and public and others 38.03 per cent.
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