Tata Elxsi Ltd. share price target

Tata Elxsi (TELX) is a leading provider of integrated services - from research and strategy, to electronics and mechanical design, software development, validation, and deployment across industries including Automotive, Broadcast & Communications, and Healthcare. During Q3FY22, TELX's revenue grew 33.2% YoY to Rs. 635 Cr (6.7%...

Strong capabilities, ER&D; demand to aid growth. Tata Elxsi (TELX) is a leading provider of integrated services - from research and strategy, to electronics and mechanical design, software development, validation, and deployment across industries including Automotive,...

Heartening sequential performance:Tata Elxsi (TELX) reported a strong revivalin sequential performance driven by strong volume growth.

Revenue, Margin Performance Heartening; Improved Disclosure Key Positive Tata Elxsi (TEL) posted improved performance in 2QFY20, with revenue up by a healthy 6.7% QoQ to Rs3.86bn. The key SDS segment saw a solid 6.1% QoQ revenue growth, which comes after two successive sequential declines. On the other hand, SIS revenue rose 28.5% QoQ on a low base. Within SDS, EPD revenue rose 5.3% QoQ, while IDV rose 11.3% QoQ. TEL has started disclosing more detailed operating metrics in terms of verticals, geographies, delivery-wise revenue, employee and client data, which we believe enabled a more granular understanding of its business. Within EPD, growth was led by the key Transportation vertical, which rose 9.2%...

Yet Another Set of Bad Numbers: Tata Elxsi (TELX) reported another set of disappointing numbers as ramp downof JLR business accelerated and pain in passenger vehicle market continues.Revenues for the quarter came in at Rs. 3617 Mn, down 11% sequentially.

Despite strong domain expertise in the automotive vertical (~52% of rev), growth prospects have been dented by project delays, particularly in the JLR portfolio (~18% of rev). Part relief is likely from (1) Driving greater annuity/large deals (sales incentives), (2) IP-revenue, (3) Geo expansion, (4) Automotive vertical adjacencies, (5) Momentum in Healthcare, and (6) Account mining (currently sub-scale). We have factored 9/6% USD rev/EPS growth over FY19-21E. We reckon that the valuation drift (23x to 16x P/E) over the past year is unlikely to reverse soon, with limited growth visibility (lower project duration vs. peers), near-term growth challenges (automotive vertical) and margins normalizing. We assign a Fair Value of Rs 945, at 18x FY21E EPS (25% discount to its historical valuations and 10% discount to LTTS). Tata Elxsi (TELX) is an integrated design and engineering services company (USD 230mn rev) with Automotive, Broadcast & Communication being key verticals. TELX growth decelerated in FY19 to 9% CC following 21/15% CC in FY17/18, margin moderated from its 1Q peak. We recently hosted investor meetings with TELX management. TELX is a high quality ER&D; services franchise facing industry headwinds. Despite slowdown in global automotive R&D;, industry opportunities include (1) Shifts within R&D; allocation, (2) Underpenetrated ER&D; outsourcing market (vs. IT services), (3) Fragmented vendor-base and scale differential vs. large peers (5 to 7.5x vs. TELX).

Weak auto segment spoils the show: Tata Elxsi (TELX) continued with its weak performance in Q4FY19.

INR4.05b, a 5% miss to our estimate of INR4.27b. In CC terms, this implies a decline of ~0.5% QoQ, based on our analysis, and in USD terms, revenue grew ~0.5% QoQ to USD57.5m. EBITDA margin shrank 110bp QoQ (-100bp YoY) to 24.3%, below our estimate by 120bp, mainly due to an increase in...