Geojit Financial Services Recommends Tata Elxsi with a Target Price of Rs 5135
Tata Elxsi (TELX) Research Report
Company Overview
Tata Elxsi (TELX) is a leading provider of IT ER&D (engineering, research and development) services with capabilities across Automotive, Broadcast & Communications, and Healthcare industries.
Financial Performance
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Tata Elxsi's 9MFY26 revenue declined by 2% YoY, with a sequential recovery of 3.9% led by a 7.7% rebound in Transportation driven by SDV-driven OEM ramp-ups and normalization of key client engagements. However, most geographies posted YoY declines, with Europe and North America showing sequential recovery of 5% and 13% respectively, while India fell 9% due to weaker automotive supplier demand.
EBITDA Margin
The company's EBITDA margin declined by 534 bps YoY to 22% in 9MFY26, but expanded by 220 bps QoQ due to 200 bps utilization-led operating leverage, 80-85 bps cost discipline, and 35 bps forex gains, partly offset by a 110 bps wage hike impact.
Outlook
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Tata Elxsi's domain expertise, design-led approach, and offshore execution position it for steady recovery. We expect anchor client recovery over the next 1-2 quarters and recommend a Buy rating with a target price of Rs.5,135 at current market price (CMP).
Valuation
We value TELX at 33x FY28E EPS.
Recommendation
- Rating: Buy
- Target Price: Rs.5,135
- Current Market Price: CMP
Investor Takeaway
Investors should consider Tata Elxsi for its potential growth in the IT ER&D services sector.
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