We interacted with the CFO of TELX to reaffirm progress within automotive and structural recovery beyond Transportation. The R&D budgets are still being prioritized to improve cost parameters, while fixing the current vehicle architecture instead of new product development initiatives. The decisionmaking cycle has progressed, with a notable recovery in client sentiment and limited budget constraints. Optimizing software (for efficiency) and time-tomarket (new features) have become extremely critical to stay competitive against Chinese OEMs, which is equally balancing vehicle pricing and cost equations. Although the company hasn’t made any notable breakthroughs in Chinese market but have secured a handful of engagement with local players. The overall deal constructs have not seen any material change in terms of pricing or tenure; the overall ACV is still comparable to the earlier engagements while pricing plays a trade off against right-shoring.
OutlookThe stock hammered notably by ~33%/~2% in FY25/YTDFY26, meanwhile Nifty IT saw an improvement of 5.3%/5.5% during the same period. Valuation remains expensive, trading at 35x (Sep-27 EPS). We assign 36x to Sep-27 EPS. The stock price correction is leading to change our rating to HOLD (REDUCE earlier).
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