Tata Elxsi Q4 Results Review: Strategic Deal Wins To Partially Mitigate Near-Term Headwinds, Says DRChoksey

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DRChoksey Report

Tata Elxsi Ltd.’s Q4 FY25 performance was below expectations, with weakness across transportation—impacted by OEM-led program deferrals— and media, which remained under pressure from client restructuring and cautious R&D spending. The healthcare segment, however, showed sequential recovery, supported by traction in digital engineering and recent client additions.

Strategically, the company secured three large multi-year deals, including a €50 million SDV engagement and a $100+ million, three-year consolidation contract in media, which are expected to drive annuity revenue from FY26E. It also marked its entry into the aerospace and defense vertical, with initial revenue contributions anticipated in FY26E.

Amid persistent global headwinds—ranging from geopolitical risks to evolving trade and tariff dynamics—project ramp-up delays and discretionary spend rationalization by clients continue to weigh on near-term growth visibility.

Factoring in these recent developments, we reduce our FY26E/FY27E EPS by 4.0% each to Rs 142.3/ Rs 169.8 respectively.

We value Tata Elxi at a lower P/E multiple of 30.0x (earlier: 33.0x), implying a target price of Rs 5,093. Although, the ramp-up of recent large deals and Tata Elxsi’s strategic pivot toward OEMs and SDV-focused engagements is likely to support revenue stability ahead, we believe the stock is fairly valued.

Accordingly, we downgrade our rating to “Hold” from “Reduce” and maintain a cautious stance pending greater visibility on margin normalization and macro recovery.

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