Tata group stock is 97% away from 52-week-low

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Tata Elxsi Ltd., a large cap firm in the IT software sector, is valued at Rs. 50,438.31 crores on the market. Tata Elxsi, one of the world’s leading providers of design and technology services, works with clients in the automotive, broadcast, communications, healthcare, and transportation industries.

On the NSE, Tata Elxsi’s shares closed the day at 8,099.80 a share, up 0.49 percent from the previous closing of 8,060.60. At the present market price, the stock is trading 97.21 percent above the 52-week low and 14 percent below the 52-week high. The stock had a 52-week high of $9,420.00 on 31-March-22 and a 52-week low of $4,107.05 on 20-July-21. Sharekhan, a brokerage firm, has given a buy call on the stock with a target price of Rs. 9,200, implying a potential gain of 13.58% over the stock’s current market price.

According to Sharekhan, who wrote a note about the company’s performance, “Tata Elxsi Limited’s (TEL) robust sales growth trend remained during Q1FY2023, with margin improvement despite partial wage revision (covered 30-40 percent of its senior-level employees). TEL reported constant currency (CC) sales growth of 6.5% year on year and 30.9% quarter on quarter, driven by strong volume. Solid net recruiting, excellent deal intake across verticals, new logo additions, and effective client mining were all observed in Q1. EBITDA margin increased by 36 basis points year on year to 32.8%, above our expectations, thanks to robust growth, higher utilization, better pricing, and SG&A efficiency.”

“Given its distinctive strengths in design-led engineering, TEL is well positioned to seize market possibilities across the targeted verticals and its adjacencies. Given the high order intake, excellent digital engineering skills, and sizable addressable markets, we believe TEL is well positioned to achieve another year of significant growth in FY2023E. Given good revenue growth visibility, consistency in contract wins, long-standing partnerships with marquee clients, and market share increases, TEL may be the only Indian IT business whose stock performance (up 37 percent) has significantly beaten CNX IT (down 32 percent) on a YTD basis. The stock is selling at a pricey 72/69/x multiple of its FY2023E/FY2024E earnings at the CMP. We still favor TEL because of its superior margin profile despite supply-side pressure experienced by the entire industry, excellent offshore delivery capacity, stable balance sheet, and advantageous sector tailwinds. With a revised price target (PT) of Rs.9,200, we retain our Buy rating on TEL, according to Sharekhan’s research analysts.

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