Target: ₹4,420
CMP: ₹6,067.30
Tata Elxsi (TELX) reported a disappointing print vs I-Sec’s already muted estimates. Q1-FY26 marks the fourth straight quarter of muted revenue performance. Large deal wins are taking longer to convert owing to the tough demand environment across verticals.
With poor revenue performance, EBIT margin was also down to 18.2 per cent (-823 bps y-o-y), similar to its print during Covid. Transportation underperformed with flattish growth q-o-q; not aligned with the optimistic commentary from Q4FY25. Management expects FY26 growth to be led by transportation business.
TELX is working on large deals across areas: digital design, medical devices, pharma and bio technology, agriculture manufacturing and specialised vehicles, mostly surrounding cost efficiency themes. Mercedes Benz deal is expected to ramp up in the next couple of quarters. The two deals signed in Q4FY25 are ramping up as expected. TELX is in discussion for strategic deal with two new logos from Japan in ADAS and connected vehicles. It has also bagged a multimillion-dollar deal with a US tech giant.
Commentary on healthcare business has deteriorated from Q4FY25. We expect continued drag from media and healthcare verticals. Maintain SELL with a one-year forward TP of ₹4,420 on an unchanged target PE of 30x. Reduce FY26E EPS by 13 per cent factoring in lower margins.
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Published on July 11, 2025