Hold Tata Elxsi; target of Rs 7590: ICICI Securities

ICICI Securities research report on Tata Elxsi

Tata Elxsi (TELX) reported muted growth of 0.2% QoQ CC in Q2FY25. While the Auto vertical continues to grow at a healthy pace, challenges persist in Communication and Healthcare. Given softer growth in H1F25, at ~6.5% YoY CC, management’s earlier guidance of double-digit CC growth in FY25 requires ~7% CQGR in H2FY25, seems a tall ask. We model 7.9%/15.1%/14.8% YoY CC revenue growth in FY25E/26E/27E. We expect EBITDA margin to remain range-bound at ~29–30% and has downside risk if growth moderates further.

Outlook

We value TELX at a 5-year average multiple of 49x on Q2FY26E–Q1FY27E EPS of INR 158 and arrive at a TP of INR 7,590 with potential 2% downside. We like the company given its presence in high growth service lines of design, embedded and digital engineering, diversified vertical exposure and superior margins. We assign HOLD rating given premium valuations on backdrop of moderating growth.

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