Tata group stock turns ₹1 lakh to ₹12 Cr after 1 bonus share: Buy post Q3?

Tata Elxsi Q3 earnings

For the quarter ended December 2022 or Q3FY23, the company posted revenue from operations of ₹817.7 Cr as compared to ₹635.4 Cr posted in the same quarter last year or Q3FY22, representing a YoY growth of 28.7%. Whereas Tata Elxsi said its overall quarterly revenue crosses US$ 100 million for the first time. The company reported an EBITDA of ₹246.9 Cr in Q3FY23 against ₹210.8 Cr recorded in Q3FY22, representing a YoY growth of 17.1%, whereas its EBITDA margin expands to 30.2% YoY and 9.0% QoQ growth. 

Tata Elxsi recorded a profit before tax (PBT) of ₹240.1 Cr in Q3FY23 as compared to ₹200.3 Cr posted in the year-ago quarter, representing a YoY growth of 19.9% whereas the company recorded a profit after tax (PAT) of ₹194.7 Cr in the quarter ended December 2022 against ₹151.0 Cr recorded in the quarter ended December 2021, registering a YoY growth of 29.0%. EPS grew by 11.7% QoQ and 29.0% YoY to Rs. 31.26, according to the company.

EPD, IDV, and SIS all experienced strong growth QoQ of 5.1%, 25.5%, and 9.3%, respectively. With the help of significant acquisitions and market share gains in EV, Software Defined Vehicles, and adjacencies, Tata Elxsi said that its Transportation segment had outstanding growth of 12% QoQ and 33.2% YoY. New product engineering, digital health, and regulatory services all contributed to the 28.4% YoY growth in the healthcare sector. Media and Communications sector climbed 14.7% YoY, helped by new successes in Android TV and AdTech, as well as platform-led agreements with operators.

Mr. Manoj Raghavan, CEO and Managing Director, Tata Elxsi, commenting on the company’s performance, said “We have delivered a quarter of steady growth in a seasonally weak and challenging quarter for the technology industry and macro-economic uncertainty in our key markets. We are seeing strong and sustained growth in the Automotive and adjacent segments in Transportation, led by our differentiated EV and digital capabilities. We won multi-year deals in EV and Software Defined Vehicle architectures in the automotive space, and a strategic entry into a global OEM software organization.”

“Both our Healthcare and Media & telecom business saw some impact of delayed decision-making, furloughs and a short quarter. We have done well to protect our business and position ourselves strongly for upcoming strategic deals. In the Media and Telecom vertical, we have won strategic platform-led deals with operators in media and communications, and new wins especially in the AdTech space. The Healthcare & Lifesciences vertical saw new product development deals including a Renal Home care platform for a leading US medical device company. Our Design business continues to win Design Digital deals for the company across our key verticals. It is seeding opportunities for larger development projects and next-generation digital applications, including AR/VR and AI enabled entertainment experiences,” said Mr. Manoj Raghavan.

“For us, this has been a quarter of focusing on positioning ourselves strongly for the future with our unique design-led capabilities, scaling across our customer base, and harnessing the exceptional investments in employee additions we have made in the last quarter and before. The attrition rate declined for the third consecutive quarter, even as we continue to invest in bringing in the right expertise to deliver exceptional outcomes for our customers. This is helping us accelerate growth in the increasing number of strategic accounts and new offerings we are bringing to market. We have also invested in establishing a digital engineering center in Frankfurt, to support our growth in Germany and Europe. We are entering the last quarter of the financial year with a strong order book and a healthy deal pipeline across key markets and industries, and a differentiated Design Digital positioning,” he further added.

Tata Elxsi share price and bonus share history

On Friday, the shares of Tata Elxsi closed on the BSE at ₹6662.10 apiece level, up by 0.99% from the previous close of ₹6596.80. The stock touched a 52-week-high of ₹10,760.40 on (17/08/2022) and a 52-week-low of ₹5,708.10 on (26/12/2022). The shares of Tata Elxsi have risen from ₹10.63 as of 5th April 1996 to the current market price logging in at an all-time high of 62,572.62%. Therefore, an investor would have received 9,407 shares overall if he or she had invested ₹1 lakh at the stock’s initial price level of ₹10.63. 

Data on BSE indicates that on September 18, 2017, the company declared bonus shares at a 1:1 ratio. Therefore, upon the announcement of the bonus shares, the number of shares held by that investor would have climbed to a total of 18,814. As a consequence, based on the current market price, the total value of the 18,814 shares is now more than Rs. 12.53 Crore. As a result, an investment of ₹1 lakh made in Tata Elxsi would have grown to ₹12 Cr if an investor had invested in the stock 26 years ago.

Should you buy the shares of Tata Elxsi post Q3 earnings?

The research analysts of the broking firm KRChoksey said “TELX is currently trading at a valuation with a P/E multiple of 58.63x / 47.52x on FY23E/FY24E earnings. We expect strong deal momentum across verticals, the addition of new clients from newer geographies, a higher focus on IDV especially in design-led digital projects, and a multi-year tailwind in EPD and hence we are assigning a P/E multiple of 64x to the FY24 estimated EPS of INR 138.8 to arrive at a target price of INR 8,884 per share, an upside of around 35% over the CMP. Accordingly, we maintain our rating to a “BUY” to the stock.”

On Friday, the research analysts of HDFC Securities said “Tata Elxsi’s (TELX) growth was propelled by IDV business, but the growth rate for TELX has been moderating. Growth in Q3 was led by the Design segment, which contributed nearly half of incremental growth and revenue was also boosted by strong growth in the Transportation vertical. These were offset by a sequential decline in Media & Communication and Medical verticals on furlough impact. Deal wins and pipeline (including a strategic entry in the new European OEM program) are expected to retain momentum in the Transportation vertical. Design business traction is driven by integrated EPD deals, supported by recent restructuring and sharper client focus. TELX’s nearterm outlook for the Media & Communication vertical remains soft and for Medical devices, the outlook is of normalised growth, impacted by extended timelines of EU medical device regulations. While TELX’s valuation multiples have come off, it still remains above comfort levels (currently at 49x and 39x FY24E and FY25E earnings) factoring in 24% EPS CAGR over FY22-25E. At the current valuation, the implied USD revenue growth is >21% CAGR over FY22- 32E. Maintain SELL on TELX with TP of INR 6,000, based on 40x Sep-24E EPS.”

The research analysts of Sharekhan said “Management indicated that while demand outlook for Media& communications and Healthcare & Medical devices would be soft, they are more optimistic on Healthcare & Medical Devices to recover faster. Both were impacted by furloughs & fewer working days. Net additions declined by 72 employees, taking total headcount to 11,607. The company plans to add freshers in the next two quarters and will add 400-500 engineers per quarter for the next four quarters. On the demand outlook, the management stated among Top 10 clients they are seeing some large deals not moving forward and seeing caution in the market. Clients prefer to adopt wait and watch policy. The company stated that it will take couple of quarters before they get some clarity. We expect the outlook for FY24 to be uncertain on account of global headwinds and any recovery is most likely to be gradual. Given the continuing macro uncertainties and tapering of earning growth trajectory for Tata Elxsi, we maintain Reduce rating and revise our PT to Rs. 6,185. We advise investors to wait for a better entry point for long-term investment.”

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