Tata Elxsi gains 3% after net profit rises 5.9%; Morgan Stanley issues note of caution

Analysts at Morgan Stanley have said that while the Q2 was strong, the company will need strong execution. .

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Shares of Tata Elxsi opened 0.7 percent higher on the NSE on October 18, a day after the design and technology services company announced its Q1FY24 results. By 9:40am, the stock was trading at Rs 7,649, nearly 3 percent higher than the October 17 close.

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In a regulatory filing of the results, Tata Elxsi reported 5.9 percent on-quarter growth in net profit and 14.8 percent on-year rise to Rs 200 crore for the quarter ended September 2023. Revenue grew 3.7 percent on-quarter and 15.5 percent on-year to Rs 881.7 crore.

Also read: Tata Elxsi to develop automotive cyber security solution with IISc

For Q2FY24, growth in the transportation segment was 7.1 percent quarter-on-quarter (QoQ) aided by large deals and strong traction in software defined vehicle (SDV) engagements. For the same period, the healthcare division grew at 3.6 percent QoQ, driven by new product engineering, digital health and regulatory services. Media and communications segment also grew marginally at 0.1 percent QoQ.

Morgan Stanley has given an ‘underweight’ call on the stock with a target price of Rs 6,400 per share. According to the brokerage, while the Q2 was strong, the company will need strong execution. Also, the brokerage added the room for EPS to move up is limited. “This, along with premium valuation, makes risk-reward unfavorable,” the brokerage added.

Tata Elxsi is a provider of design and technology services across industries
including Automotive, Broadcast, Communications, Healthcare and Transportation.

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