Reduce Tata Elxsi; target of Rs 7500: Sharekhan

Sharekhan's research report on Tata Elxsi

Tata Elxsi Limited’s (TEL) Q2FY2023 performance missed the mark – both on the revenue and margins front. Revenue increased by 4.7% qoq in CC term and EBITDA margin dropped by 312 bps to 29.7%. Margin was impacted by strong addition in headcount in Q2, opening of centres in three locations, back-to-office costs, and increased discretionary spends such as travel and training. Management cited softness in Media and Communications on account of macro-uncertainties, though it remains fairly confident on other verticals.

Outlook

At the current juncture with macro uncertainties and earnings growth trajectory tapering off, we downgrade our rating on the stock to Reduce from Buy. We also revise our PT to Rs. 7,500. We advise advisors to wait for a better entry point for long-term investment.

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Tata Elxsi - 171022 - khan