Motilal Oswal Sees Tata Elxsi Reaching Rs 3350

Tata Elxsi Posts Mixed Quarter, Sees Modest Estimate Revisions

Tata Elxsi, a leading provider of design and technology services, reported revenue of USD109 million in its 4QFY26 quarter. The company's revenue growth of 0.9% quarter-on-quarter (QoQ) in constant currency (CC) terms fell short of Motilal Oswal's estimate of 2.0% CC.

The growth was led by Tata Elxsi's media and communication business, which saw an increase of 5.6% QoQ CC. However, the company's healthcare and life sciences (HLS) segment declined by 13.1% QoQ CC. On the profitability front, Tata Elxsi's earnings before interest and tax (EBIT) margin expanded to 22.3%, a 140 basis points (bps) increase from the previous quarter, surpassing Motilal Oswal's estimate of 20.4% EBIT margin.

The company's adjusted profit after tax (PAT) witnessed a significant growth of 23.1% and 27.8% QoQ and year-over-year (YoY) respectively, reaching INR2,204 million. This figure exceeded Motilal Oswal's estimate of INR1,841 million.

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Estimate Revision and Outlook

Motilal Oswal has modestly revised its estimates for Tata Elxsi's FY27 and FY28 by 1%. The research firm expects the company's EBIT margin to expand gradually and towards the end of the fiscal year, reaching 23.7%. Based on its valuation model, Motilal Oswal values the stock at 22 times FY28 estimated earnings per share (EPS), with a target price (TP) of INR3,350.

Recommendation

Motilal Oswal reiterates its Sell rating on Tata Elxsi, reflecting the company's current valuation and outlook.

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