Tata Elxsi top midcap loser as IT firm posts sequential decline in net profit

Share price of midcap IT firm Tata Elxsi slumped seven percent today after the company reported a sequential decline in its net profit.

For the quarter ended September, net profit stood at Rs 174.27 crore as against Rs 184.72 crore in the June quarter.

At 10:30 am, the stock the top midcap loser quoting at Rs 7,874 on the BSE, down 6.8 percent. The BSE Midcap index was down only 0.68 percent.

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On October 14, the company said its revenue from operations grew 28 percent year-on-year to Rs 763.2 crore in the September quarter. Profit after tax grew 39.1 percent and employee mark crossed 11,000 with 1,532 net additions in the quarter. Ebitda profit margin came in at 29.7 percent.

The company’s growth was primarily volume-led, with embedded product design, industrial design and visualisation, and SIS showing sequential growth of 3.8 percent, 13.5 percent and 26.2 percent respectively.

Manoj Raghavan, CEO, said, “We are seeing strong and sustained growth in the automotive and adjacent segments, led by our electric vehicle and digital capabilities.”

Brokerages remain wary of the stock due to expensive valuations. Morgan Stanley has an underweight call on the stock with a target price of Rs 5,800. “Medium-term risks on margin and premium valuations keeps us underweight,” it said.

Analysts at Choice Broking noted, “While we are confident about the growth of the company, we feel skeptical regarding company being able to maintain margins at a level that justifies current level of valuation.” They have a reduce rating on the stock with a target price of Rs 7,963.

The stock is currently trading at a price-to-earnings ratio of 78.5x.

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