After de-rating over the previous two years, HDFC Securities predicts that the pace of recovery in the non-transportation segment will dictate Tata Elxsi’s trajectory in valuation multiples.
On August 27, trade in Tata Elxsi shares surged by 15% as a result of strong countervolume trading. With this, the stock gained more than 22 percent in just two days, continuing its upward trend for the fourth straight session.
Up to 38 lakh Tata Elxsi shares have traded on the exchanges thus far, a sharp increase over the one lakh share average for daily trading over a one-month period. The technology company’s shares were trading at Rs 8,833.80 on the NSE at 2:20 PM. The market capitalization of the stock increased to Rs 55,039 crore along with the stock’s dramatic rise.
The trailing 12-month (TTM) price-to-earnings (PE) ratio of 69.1 is currently being traded for the stock. The brokerage Incred Equities projects a compound annual growth rate (CAGR) for FY24–27 of 12.1% for revenue in US dollars, 15.8% for EBIT, and 14.2% for the bottom line.
Marcellus Investment Managers, led by Saurabh Mukherjea, has recently sold Tata Elxsi, which was a holding in the company’s Rising Giants PMS portfolio. The fund house blamed the departure primarily on CMS Info Systems, Escorts Kubota, and Coforge, who were expected to bring in higher internal rates of return.
Tata Elxsi’s Q1 net profit decreased sequentially by 6% to Rs 184 crore, despite a slight increase in revenue of 2% to Rs 926 crore.
Tata Elxsi is expected to benefit from the high certainty of double-digit growth in FY25, according to brokerage firm HDFC Securities, which is driven by client and sub-segment skew. Apart from that, the brokerage anticipates that in terms of segmentation, the company’s transportation vertical will continue to propel growth in FY25–26, while the segments related to media and communications, healthcare, and life sciences will rebound in FY26.
“The rate of recovery in the non- transportation segment will determine the trajectory in valuation multiples, following its de-rating over the past two years,” the brokerage stated.
