Target: ₹4,250
CMP: ₹5,344.45
Tata Elxsi has reported a muted Q4FY25 print with revenue contraction of 5.3 per cent q-o-q CC, roughly in line with our estimate (of -5.9 per cent) and falling below consensus. Transportation vertical downturn was sharp, though already built into I-Sec’s estimate.
FY25 revenue growth stood at 3.1 per cent CC vs I-Sec estimate of 2.7 per cent. Full year EBIT margin was 23.3 per cent vs estimated 24.4 per cent. Transportation/ media & communication healthcare and life sciences, others verticals grew +11.8/-5.5/-.9.4/23.3 per cent CC y-o-y (vs +20.4/-2.6/+7.6/+2.9 per cent CC in FY24), respectively.
Other highlights of Q4 include: 3 large deals signed with higher annuity component, a pivot towards emerging geographies and company highlighting growth bounce back in Q1FY26. Though new deals give some near-term respite, structural and macroeconomic issues loom large. We largely maintain our estimates and tweak FY26E EPS by 130 bps on slightly better near-term visibility lent by large deals and optimism in healthcare-led demand. Recommend Reduce (from Sell – on recent stock correction of 7 per cent in last one month) set at an unchanged 1-year forward PE of 30x.
Key Upside risks: Faster ramp ups of existing and new large deal wins and regulatory changes leading to lifting to demand overhang from US geography.
Published on April 21, 2025
