Tata Elxsi shares slide 6% after weak Q1 results. Why Motilal Oswal sees 16% downside from current levels?

Shares of Tata Elxsi slipped 6% to their day’s low of Rs 3,474 on the BSE on Wednesday after it reported a net profit of Rs 170.6 crore for the quarter ended June 30, 2026, marking a growth of 18.2% year-on-year (YoY). Revenue from operations rose 14.5% YoY and 2.8% sequentially to Rs. 1,021.1 crore.

The company's profit before tax (PBT) stood at Rs. 232.5 crore during the quarter, up 18.4% from a year ago, with a PBT margin of 21.9%.

Operating performance also remained strong, with EBITDA rising 15.7% year-on-year to Rs. 216 crore. The company reported an EBITDA margin of 21.2%, while its net profit margin came in at 16.1% for the quarter.

What are analysts saying?

Motilal Oswal has maintained its Sell rating on Tata Elxsi with a target price of Rs. 3,100, implying a downside of around 16% from current levels.

The brokerage said the company's June quarter performance does little to alter its broader growth outlook. Revenue grew 1.3% quarter-on-quarter in constant currency, broadly in line with expectations, but the growth was largely driven by the Media & Communications segment. The larger Transportation business, which contributes around 55% of revenue, along with Healthcare, continued to remain weak.

Motilal Oswal believes a meaningful recovery in Tata Elxsi's growth will depend on an improvement in the Transportation segment, where client spending, particularly across Europe, remains cautious.

The brokerage also highlighted that margins were significantly below expectations. Tata Elxsi's EBIT margin contracted to 19%, missing its estimate of 21.5%.

Choice Institutional Equities has downgraded Tata Elxsi to Sell and cut its target price to Rs. 3,150 from Rs. 3,650, after lowering its FY27 and FY28 earnings estimates by 2.7% and 6.0%, respectively.

The brokerage said Tata Elxsi's Q1FY27 performance was weaker than expected, with margins hurt by higher project costs and continued strategic investments despite healthy growth in the Transportation and Media & Communications segments.

While the company's management continues to target high single-digit revenue growth in FY27, backed by a healthy large-deal pipeline and an expected recovery in the Healthcare business, Choice Institutional Equities remains more cautious. It cited continued weakness in the European automotive market and delays in healthcare order conversions as key risks.

The brokerage also noted that Tata Elxsi is accelerating investments in AI capabilities, platforms and talent to strengthen its domain-plus-AI offering. While these investments are expected to improve the company's long-term growth prospects and competitiveness, they are likely to keep margins under pressure in the near term.

Tata Elxsi Q1 management commentary

Tata Elxsi said its Healthcare and Life Sciences business grew 1.7% quarter-on-quarter despite a subdued demand environment in the healthcare industry. The company said it is investing in an AI-first, design-led and regulatory-aware engineering approach for the segment, while partnering with leading global AI companies. During the quarter, it launched ViTEL, a GenAI-powered material intelligence platform, and AnaTEL, an AI-native software development platform for the medtech and healthcare industry.

The company said it remains well positioned to address customers' strategic priorities across its focus verticals, including connected, intelligent and software-defined products, digital transformation, AI-led efficiencies, customer experience and engineering modernisation.

Tata Elxsi added that it remains focused on delivering sustainable growth by deepening relationships with key customers, pursuing long-term strategic deals, adding marquee clients and maintaining its industry-leading margins.

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