Tata Elxsi shares crack 8% after brokerages cut target price post Q3 results

Shares of Tata Elxsi fell 7.9% to their intraday low of Rs 5,935.05 on the BSE today (January 10) after the company reported a 3% decrease in net profit for the quarter ending December 2024, which led to a target price cut from brokerage firms.

The company’s profit declined to Rs 199 crore from Rs 206 crore in the same period last year.

Revenue from operations for the third quarter grew 3% year-on-year (YoY), reaching Rs 939 crore compared to Rs 914 crore in the corresponding quarter of the previous fiscal year.

Tata Elxsi share price targets:

Morgan Stanley: Underweight | Target price: Rs 6,000

sMorgan Stanley cut the stock’s target price to Rs 6,000 from an earlier Rs 6,500.
Continued weakness in European transportation, the lack of a significant recovery in media and healthcare, limited growth visibility, potential cuts to consensus estimates, and high valuation suggest the stock could continue to underperform.

JPMorgan: Underweight | Target price: Rs 5,400

JPMorgan reduced the target price for the stock to Rs 5,400 from Rs 5,700 previously.

Third-quarter (3Q) results significantly missed expectations on both revenue and margins for the second consecutive quarter. Constant currency (CC) quarter-on-quarter (QoQ) revenue growth was flat, 100 basis points below JPMorgan's (JPMe) estimates, while EBIT margins declined 160 basis points QoQ, 180 basis points below JPMe. As a result, earnings estimates have been cut by 3-5% over FY26-27E.

The company’s operating EBITDA for the December quarter stood at Rs 247 crore, with EBITDA margins at 26.1%. Profit before tax (PBT) for the quarter was Rs 26 crore, resulting in PBT margins of 26.3%.

“We continue to see positive outcomes from our strategic business focus on Japan, emerging markets, and capitalizing on the India opportunity," said Manoj Raghavan, CEO and Managing Director of Tata Elxsi.

Tata Elxsi mentioned that the automotive industry has faced substantial business challenges in recent months, with OEMs, particularly in the US and Europe, experiencing difficulties in sales and growth in their key markets. This has led to a slowdown in new deal closures and a reduction in spending by Tier 1 suppliers.

The media and communication business recorded quarter-on-quarter constant currency (QoQ CC) growth in a period that is usually slower due to furloughs. The company is well-positioned to support customers in the media, entertainment, and telecom sectors across all three areas of growth, efficiency, and innovation.

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The company has secured a major multi-year deal with a US-based MSO to develop and manage its portfolio of applications, with plans to scale this up in the upcoming quarters.

The healthcare and life sciences division saw a 1.1% QoQ growth, continuing to attract new prominent healthcare clients, while its Gen AI-driven offerings in regulatory, digital engineering, and sustainability gained notable market traction.

The systems integration (SIS) division experienced delays in decision-making for several large projects, which significantly impacted revenues for the quarter.

On Thursday, Tata Elxsi shares dropped by 0.33%, closing at Rs 6451.95 on the NSE. The stock price fell 25.49% in the last year and underperformed its sector by 58.46% over the same period. Meanwhile, it has given 660% returns in the last five years.

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Incorporated in 1989, Tata Elxsi is a mid-cap company with a market cap of Rs 40,107.76 crore operating in the IT Software sector. The company is among the world’s leading providers of design and technology services across industries, including automotive, aerospace, broadcast, communications, healthcare, and transportation.