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Tata Elxsi shares fall over 5% after Q4; Some analysts see another 20% downside
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Media and Communication, which contributes to a third of Tata Elxsi’s topline saw growth decline by 4% during the quarter.
Shares of Tata Elxsi are down over 5% on Wednesday after the company’s revenue growth missed street expectations for the March quarter.
Tata Elxsi reported a constant currency revenue decline of 0.6% compared to the December quarter. However, the figure was lower than the 3.5% sequential growth projections from JPMorgan.
Media and Communication, which contributes to a third of the company’s topline saw growth decline by 4% during the quarter due to a challenging industry environment and a one-time ramp-down impact with one customer.
Brokerage firm Morgan Stanley said that the management of Tata Elxsi sounded constructive on revenue growth in financial year 2025. However, the brokerage added that good commentary may not be enough given the burden of higher expectations and steep valuations.
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As a result, Morgan Stanley has cut Tata Elxsi’s Earnings per Share (EPS) estimates by 3.9% and 5.4% for financial year 2025 and 2026 respectively.
JPMorgan has also cut its price target on Tata Elxsi to ₹5,800 from ₹6,000 earlier, while maintaining its “underweight” recommendation.
Morgan Stanley also has an “underweight” rating on Tata Elxsi.
Out of the 10 analysts that have coverage on Tata Elxsi, six of them have a “sell” rating while the remaining have a “buy” recommendation.
At the current price, Tata Elxsi is trading at a price-to-earnings multiple of 39 times for financial year 2026, which is below its five-year average multiple of 54 times.
Shares of Tata Elxsi are down 4% in early trade at ₹7,105. The stock is down 22% from its 52-week high of ₹9,200. Shares of this Tata Group company have risen 13% in the last one year.
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