ICICI Securities research report on Tata Elxsi
TATA Elxsi (TELX) reported a disappointing print vs I-Sec’s already muted estimates. Q1FY26 marks the fourth straight quarter of muted revenue performance. Large deal wins are taking longer to convert owing to the tough demand environment across verticals. With poor revenue performance, EBIT margin was also down to 18.2% (-823bps YoY), similar to its print during Covid. Transportation underperformed with flattish growth QoQ; not aligned with the optimistic commentary from Q4FY25. Management expects FY26 growth to be led by transportation business. Commentary on healthcare business has deteriorated from Q4FY25.
Outlook
We expect continued drag from media and healthcare verticals. Maintain SELL with a one-year forward TP of INR 4,420 on an unchanged target PE of 30x. Reduce FY26E EPS by 13% factoring in lower margins.
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