Tata Elxsi falls over 2%, slips below ₹7,000 on Q1 PAT fall

Shares of computers - software & consulting company Tata Elxsi dipped 2.6% today after it reported a fall in net profit in the first quarter of the fiscal year. Shares opened a gap down at ₹7,040 and hit the day's low at ₹6,930.45 on the BSE, taking the company's m-cap down to ₹43,483.28 crore.

The Tata Elxsi share price has fallen about 6.27% in the past one year, from ₹7,453.15 to ₹6,982.05 currently. On a year-to-date basis, the company shares fell 20.15%. In the past six months, one month and the past week, the shares have dropped 19.93%, 1.44%, and 1.54%, respectively.

For the April-June quarter, Tata Elxsi, which provides design and technology services across automotive, broadcast, communications, healthcare and transportation, reported PAT at ₹184.1 crore, a 2.5% YoY fall and a drop of 6.5% QoQ. Its revenue from operations, however, surged 9% YoY to ₹926.5 crore, and 2.3% on QoQ.

The EBITDA income of the Tata group-backed company dipped to ₹252.3 crore in Q1 FY25 from ₹251.5 crore in Q1 FY24, while the margin fell to 27.2% in Q1 FY25 from 29.6% in Q1 FY24.

Among the segments it serves, Tata Elxsi says its transportation business grew strongly at 5.3% QoQ CC and 20.3% YoY, aided by deal wins and ramp-up of Software Defined Vehicle (SDV) engagements. The media and communications business grew 0.5% QoQ CC but fell 3.8% CCYoY amid a difficult environment for the media and telecom industry. The system integration services grew at 8.7% QoQ CC and 17% CC YoY, while healthcare & life sciences fell on both QoQ and YoY basis.

Manoj Raghavan, CEO and Managing Director, Tata Elxsi, says: "We executed very well on operational excellence and fiscal discipline in this quarter towards bottom-line performance, despite the impact of an exceptional one-off expense in the quarter and an increase in the effective tax rate with the change in SEZ benefits for one of our facilities. Coupled with our differentiated offerings, offshore delivery and operational excellence, we are confident of returning to our preferred margin band over the year."

In a recent report by brokerage company HDFC Securities, Tata Elxsi rating was upgraded to "Reduce" from "Sell". In its report on June 29, 2024, the brokerage said: "High certainty of double-digit growth in FY25E driven by client and sub-segment skew and normalisation in the non-transportation business ahead are positives; upgrade TELX to REDUCE (SELL earlier). We factor 16% EPS CAGR over FY24-26E and value TELX at 38x FY26E EPS (currently trading at 41x FY26E)."