Tata Elxsi shares in focus after 6% rise in Q3 net disappoints Street

Tata Elxsi shares will be in focus after the design and technology services company reported a 3.2 percent on-quarter and a 6 percent on-year growth in net profit at Rs 206.4 crore for the quarter ended December 2023.

Tata Elxsi reported a 3.7 percent on-quarter and 11.8 percent on-year growth in revenue at Rs 914.2 crore.

The company is a provider of design and technology services across industries, including automotive, broadcast, communications, healthcare and transportation.

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Morgan Stanley retained its ‘underweight’ call on the Tata group company, with a target price of Rs 7,500 per share as the earnings missed the international brokerage’s expectations. The quality of growth could have been better, it said, with higher growth in the Embedded Product Design segment.

The brokerage added that the challenges persist in the media and parts of its transportation business, which gives an insight into the demand outlook for the company. Additionally, the delay in growth recovery, further lends cause to a lower target price, especially given the premium valuations the counter commands.

For Q3FY24, the transportation segment grew 2.7 percent quarter-on-quarter (QoQ), aided by deal wins and ramp-up of Software Defined Vehicle engagements, Tata Elxsi said in an exchange filing.

For the same period, the healthcare division grew 4.6 percent QoQ, driven by product engineering and regulatory services. Media and communications segment grew marginally by 0.6 percent QoQ.

Over the past month, shares of the company have lost 7.5 percent in trade. In comparison, the Nifty 50 index has slipped less than 1 percent in the same time period.

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