Sell Tata Elxsi, target price Rs 5373: ICICI Securities

ICICI Securities has sell call on Tata Elxsi with a target price of Rs 5373. The current market price of Tata Elxsi Ltd. is Rs 8140.3. 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 50198.55 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-2022.



Financials
For the quarter ended 30-06-2022, the company reported a Standalone Total Income of Rs 736.21 Crore, up 5.20 % from last quarter Total Income of Rs 699.83 Crore and up 27.85 % from last year same quarter Total Income of Rs 575.82 Crore. Company reported net profit after tax of Rs 184.72 Crore in latest quarter.

Investment Rationale
Company has superior operating metrics compared to its peers: 1) lowest cost of delivery, 2) highest offshore mix, 3) reducing client concentration and, at the same time, superior client-mining capabilities. The brokerage like the company for its robust growth profile and sustenance of margin way above pre-covid levels. It increases EPS estimates by 13.5%/12% led by increase in margin estimates. The brokerage are above consensus earnings by 15% for FY24E. However, the company’s super premium valuations of 66x/60x EPS of Rs122/134 for FY23/24 drive SELL rating. It values TELX at 40x the target multiple of FY24E earnings to arrive at a fair value of Rs5,373 (earlier: Rs4,557).

Promoter/FII Holdings
Promoters held 43.92 per cent stake in the company as of 30-Jun-2022, while FIIs owned 15.17 per cent, DIIs 4.21 per cent.