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HDFC Securities Institutional Equities
Tata Elxsi Ltd. posted a mixed quarter with strong growth in the transportation vertical, which offset weakness in the healthcare and Lifesciences vertical.
Tata Elxsi posted revenue growth of 2.4% QoQ and 8.4% YoY constant currency with a skewed performance and hyper growth in one-third of the business (OEM/transportation), while the remaining portfolio was sluggish.
Media and communication vertical, which had strong growth momentum in FY20-22 followed by a sluggish FY22-24, can start to revive. Volatility in the healthcare and lifesciences segment will persist for another quarter though.
We continue to believe that T1 client growth momentum and OEM sub-segment within the Transportation segment will drive the bulk of the growth over FY24-26E (more than 75% of incremental growth).
Valuations are still a stretch, maintain Reduce with a target price of Rs 6,710, based on 38 times June-26E earnings per share.
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