Reduce Tata Elxsi, target price Rs 5900: HDFC Securities

HDFC Securities has reduce call on Tata Elxsi with a target price of Rs 5900. The current market price of Tata Elxsi Ltd. is Rs 7663.95. Time period given by analyst is one year when Tata Elxsi Ltd. price can reach defined target.

Tata Elxsi Ltd., incorporated in the year 1989, is a Mid Cap company (having a market cap of Rs 48162.73 Crore) operating in IT Software sector.

Tata Elxsi Ltd. key Products/Revenue Segments include Software Development Charges and Traded Goods for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-12-2021, the company reported a Standalone Total Income of Rs 641.92 Crore, up 7.39 % from last quarter Total Income of Rs 597.76 Crore and up 30.42 % from last year same quarter Total Income of Rs 492.18 Crore. Company reported net profit after tax of Rs 150.95 Crore in latest quarter.

Investment Rationale
The brokerage remains positive on the company’s growth prospects and growth leadership in ER&D (+27/31% revenue/EPS CAGR over FY21-24E), although the risk-reward is unfavourable with growth premium vs. ER&D peers reducing. The near-term prospects remain strong with FY22E revenue growth expected at 33.6%, which would subsequently normalise to ~26/21% in FY23/24E. Its TP of INR 5,900 is based on 44x Mar-23E EPS, ~17% premium to mid-tier IT.

Promoter/FII Holdings
Promoters held 44.32 per cent stake in the company as of 31-Dec-2021, while FIIs owned 11.93 per cent, DIIs 5.54 per cent.