KR Choksey's research report on Tata Elxsi
Tata Elxsi Ltd reported a YoY revenue growth of 17.12% to INR 8,502 mn in Q1FY24, compared to INR 7,259 mn in Q1FY23. Sequentially, revenue increased marginally by 1.47% from INR 8,379 mn in Q4FY23. The EBIT for Q1FY24 was INR 2,300 mn, reflecting a YoY growth of 4.02% from INR 2,211 mn in Q1FY23. On a QoQ basis, it increased marginally by 0.61% from INR 2,286 mn. The OPM for the quarter stood at 27.05%, indicating a decline of 341 basis points (bps) YoY and 25 bps QoQ. Net profit for the quarter was INR 1,888 mn, showing a YoY growth of 2.22% from INR 1,847 mn in Q1FY23. However, on a sequential basis, it declined by 6.30% from INR 2,015 mn due to an increase in the effective tax rate. The net profit margin (NPM) for Q1FY24 stood at 22.20%, which declined by 324 bps YoY and 185 bps sequentially. The earnings per share (EPS) for the quarter stood at INR 30.32, compared to INR 29.66 YoY and INR 32.36 QoQ. During Q1FY24, the company added 422 net employees, crossing the 12,000-employee mark. The attrition rate further declined to 15.60% in Q1FY24.
Outlook
TELX is currently trading at a valuation with a P/E multiple of 55.0x/42.1x on FY24E/FY25E earnings. We expect strong deal momentum across verticals, the addition of new clients from newer geographies, a higher focus on IDV, especially in design-led digital projects, and a multi-year tailwind in EPD. Therefore, we are assigning a P/E multiple of 47.0x to the FY25 estimated EPS of INR 178.8. This calculation leads us to a target price of INR 8,406 per share, representing an upside of around 11.6% over the current market price (CMP).
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