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Tata Elxsi slips after Q4 revenue miss, margin drop

Shares of Tata Elxsi dipped 3.14 percent to Rs 6,781.85 in the morning trade on May 19 after the technology services provider posted mixed results for the March quarter.

The Tata Group firm recorded a 26 percent year-on-year growth in net profit at Rs 201.5 crore in the March FY23 quarter despite lower operating margin, aided by lower tax cost. The company clocked a profit of Rs 160.01 crore in the year-ago period.

Revenue from operations in Q4 FY23 grew 23 percent to Rs 838 crore but fell short of analysts’ estimates of Rs 868 crore.

The company’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin declined to 29.8 percent from 32.5 percent in the yera-ago quarter.

The board of directors recommended a final dividend of Rs 60.60 a share for the financial year 2022-23.

“Tata Elxsi’s Q4 print was lower on revenue, impacted by a deceleration in the Transportation vertical. We expect its growth trajectory in the mid-teens as compared to 34/24 percent delivered in FY22/23,” HDFC Securities said in a note.

While the differentiation of the company’s business (design-led engineering services) remains intact, its growth profile has moderated relative to peers, it added.

Foreign brokerage Morgan Stanley has an “underweight” rating on the stock, with the target price at Rs 5,610, a downside of 17 percent from the current levels.

Morgan Stanley, however, added that the management commentary was balanced, with positives around top client accounts and wallet share gains.

The firm’s execution prowess and domain capabilities are being partially offset by macro uncertainty. Margin ask is steep and the recent rally makes risk-reward unfavourable, it added.

Shares of Tata Elxsi fell 5 percent during the March quarter but have since surged over 17. The share has gained 9 percent in 2023, so far.

At 10.54 am, the stock was trading at Rs 6,973.65 on the National Stock Exchange, down 0.31 percent from the previous close. Moneycontrol

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