NDTV Profit's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer NDTV Profit's subscribers an opportunity to expand their understanding of companies, sectors and the economy.
HDFC Securities Institutional Equities
Tata Elxsi Ltd.'s growth is expected to recover to low double digits in FY27E, anchored by engineering engagements that are more core and sticky to customers than traditional IT services. The automotive vertical will serve as the primary catalyst, driven by a healthy large deal pipeline and ramp-ups in steady-state and security projects for the top OEM client.
Growth in the transportation vertical will be further bolstered by traction in off-road and aerospace segments. Strategic collaborations, such as the fully outsourced partnership with Suzuki, underscore the company's ability to compete with GCC models through superior technical expertise.
The communications vertical is entering a catch-up recovery phase by consolidating positions with existing clients, while healthcare demand centres around enhancing operative performance and clinical outcomes rather than job replacement. AI is fundamentally transforming ER&D by acting as a high-speed enabler rather than a disrupter.
Automation is concentrated in functions such as testing, verification, and regulatory checks across the US and European mandates, while high-level architectural roles and complex system contexts remain shielded from automation and full replacement.
The margin expansion trajectory relies on volume growth and utilization rather than cost-cutting. Consequently, hiring is being carefully calibrated, with no major headcount increases immediately but a focus on building a bench to meet the double-digit growth target. Ebitda margins are expected to expand to 26.9% in FY28E versus 26.1% in FY25 and 22.3% in FY26E.
ALSO READ: Canara HSBC Life Insurance Shares Under Spotlight On Antique's Bullish Call: Five Key Triggers
With strong client relationships, differentiated capabilities, and strategic positioning across verticals, Tata Elxsi is well-placed for growth recovery in FY27E vs ~3% decline in FY26E. However, the pace of recovery will be calibrated; thus the brokerage has reduced its revenue estimate by 3-5%.
The margin recovery is expected to be gradual, leading to a 6-7% reduction in our EPS estimate.
HDFC Securities expects Tata Elxsi to deliver revenue/EPS CAGR of 13/26% over FY26-28E (~7/10% over FY25-28E) vs five year CAGR of 14/24%.
The brokerage maintains its Add with a revised P/E multiple to 30 times (~35x earlier) and a target price of Rs 5,000, based on 30x FY28E EPS.
The stock is trading at a P/E of 32/27x FY27/28E (vs 10Y average at 36x and pre-covid 10Y average of 17x).
Click on the attachment to read the full report:
ALSO READ: Five Stocks To Buy Today: Coal India, Canara Bank, Shriram Finance, And More
DISCLAIMER
This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
