Reduce Tata Elxsi; target of Rs 5853: KR Choksey

KR Choksey recommended reduce rating on Tata Elxsi with a target price of Rs 5853 in its research report dated January 13 2025.

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January 14, 2025 / 10:51 IST

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KR Choksey's research report on Tata Elxsi

Tata Elxsi’s Q3FY25 revenue and profit missed our expectations. Revenue stood at INR 9,392 Mn, up 2.7% YoY (-1.7% QoQ), missing our expectations, due to weakness across verticals. EBIT reached INR 2,206 Mn, down 9.8% YoY (-7.8% QoQ), falling short of our estimates, primarily due to currency headwinds, and the full impact of wage hike, resulting in a 327bps contraction in EBIT margins (-156bps QoQ) to 23.5%. PAT stood at INR 1,990 Mn, down 3.6% YoY (-13.3% QoQ). The steep QoQ decline in profit was attributed to margin erosion in Q3, as well as the absence of one-time R&D incentives and tax credits that the company benefitted from in Q2FY25. We reduce our FY26E/FY27E EPS by 11.3%/ 9.5% to INR 148.2/INR 176.8, respectively, due to continued stress in the automotive segment, driven by macroeconomic pressures in the U.S. and Europe, prolonged deal closures, and intensifying competition from Chinese EV players. Execution delays in large deals and limited near-term recovery further weigh on earnings visibility.

Outlook

We roll forward our valuation to FY27E, applying a P/E multiple of 33.0x, and revise our target price to INR 5,853 (previously INR 7,359) and reaffirm our REDUCE rating on TELX.

For all recommendations report, click here