Sharekhan's research report on Tata Elxsi
Company stated that increased hyper-digitisation and technology adoption across industries would open up growth avenues as it is well-placed to leverage given its strong capabilities. Reports estimate global ER&D spends to grow at CAGR of 11% over 2020-2023 to $ 1.9 trillion. Digital engineering to ER&D spend is likely to reach at 47% in 2023 from 36% in 2020. TEL’s USD revenue and earnings are set to post a CAGR of 26% and 29%, respectively, over FY2021-FY2023E. We prefer TEL, given its strong balance sheet, improving cash generation and consistent dividends.
We retain a Buy on Tata Elxsi Limited with a revised PT of Rs. 4,500, led by shift of ER&D budgets towards digital engineering, superior margins and differentiated technological capabilities.
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