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### Tata Elxsi: CMP: 6203: Long Term: Sales 17% | Cy Sales 6.6% |Q3_Fy_25 Result Update
### About the Company
Tata Elxsi is a global leader in design and technology services, catering to various industries, including Transportation, Media, Communications, Healthcare, and Medical Devices. Established in 1989, Tata Elxsi offers integrated services from research and strategy to software development and deployment. The company leverages digital technologies such as IoT, Cloud, Mobility, VR, and AI to help clients innovate and reimagine their products and services.
### Peer Group Comparison
- **Peers**: Infosys, Wipro, Tech Mahindra, HCL Technologies, and Mindtree.
- **Size Comparison**: Tata Elxsi, with a revenue of ₹926.5 Cr, is smaller compared to larger peers like Infosys and Wipro but shows significant growth potential in niche markets like SDV, healthcare, and media communications.
### Industry Outlook
- The industry is seeing a shift towards digital transformation, AI, and software-defined solutions. With the increasing demand for SDVs, connected devices, and advanced medical solutions, Tata Elxsi is well-positioned to leverage its expertise in these areas for future growth.
### Historical Performance
- We saw the strong historical performance from this company:
FY2004: Sales & Profits were 155 Cr & 17 Cr
FY2014: Sales & Profits were 788 Cr & 75 Cr
FY2024: Sales & Profits were 3674 Cr & 792 Cr
This shows the strong growth of 17% CAGR during Last 2 decades, Maintaining the Profit margins of 14% with consistent Profits. Hence the same effect was seen in their Prices:
FY2004: Prices were 40 Rs & Dividend of 1.5
FY2014: Prices were 273 Rs & Dividend of 6
FY2024: Prices are 7119 Rs & Dividend of 70
This shows the strong growth of 28% CAGR during Last 2 decades along with high and consistent dividends. Today's dividends are almost 50% of Invested value of fy_04.
### Current Trend Till Last Quarter Q2_fy24
CC Growth, Hence revenue growth was muted along with fall in profits margins made the pressure on Profits.
### TATAELXSI's Q3 FY25:
1. Revenue and Profit Growth 📈
Q3 FY25 Sales and Profit Growth vs Last Year: The revenue from operations for Q3 FY25 was ₹939.2 Cr, representing a year-on-year increase of 2.7% from ₹914.2 Cr in Q3 FY24. During H1_fy25 the growth was 8.7%. Q3 came with weak growth.
Profit Margins: The Profit After Tax (PAT) margin for Q3 FY25 was 20.3%, down from 21.7% in Q3 FY24. Compared to Q2 FY25, the PAT margin also decreased from 22.5% to 20.3%.
2. Segmental and Regional Growth 🌍
Media & Communications and Healthcare: Both segments reported constant currency (CC) QoQ growth, with Media & Communications growing at 0.4% and Healthcare at 1.1% QoQ.
Geographical Performance: Revenue growth from India was notable at 21.9% YoY, while Japan and emerging markets grew significantly by 66.8% YoY.
3. Employee Metrics 👥
Employee Addition and Attrition Ratio: The headcount at the end of Q3 FY25 was 12,878, while it was 12,793 in Q2 FY25. The attrition rate was stable around 12.4%.
4. Important KPIs in Respect to Industry 📊
EBITDA Margin: The Operating EBITDA margin for the quarter stood at 26.3%, a slight decrease from the previous quarter's 27.9%.
5. Profitability and Valuation Ratios 💸
Valuation at Price of ₹5998: Considering the low growth F-EPS for Fy_25 seems to be ₹134 for Q3 FY25, the Price-to-Earnings (P/E) ratio at the current price would be approximately 45, suggesting a premium valuation likely due to Low growth.
### Fy_25 Outlook
CC growth is still weak. This year we may see weak Revenue & profit growth of 5%. Valuations are still not cheap despite the share in corrections since last year. All those holding for a long time can add more during this whole corrections near 4812 (SIP could be continued even now) as valuations could be better while once margins are back with growth of more than 15% we may see the rally back towards the pending targets of 12679 in the next 3 Years.
### Short Term and Long Term Outlook 🔮
Short Term: The company is navigating challenges in the automotive industry, especially in the US and Europe, but has secured significant deals that could stabilize revenue streams in the coming quarters.
Long Term: Strategic initiatives like the AVENIR SDV software suite and partnerships for cloud-native and hybrid platforms are likely to bolster Tata Elxsi's position in digital and software domains, supporting long-term growth.
### Future Outlook Long Term
- Tata Elxsi expects continued growth driven by its transportation segment, strategic partnerships, and investment in digital and AI technologies. The company aims to expand its business with key customers and secure new deals in the automotive and telecom sectors. We may see Sales reaching to the benchmark of 15000 Cr till fy_2035 while Profits could be reaching to 3000 Cr. Multiyear rally along with consistent profits can be expected over the long run.
TATA Sons are the promoter; MF are having around 4% stake while Fii hold around 14% stake.
Disclosure: Do Not Buy or sell before consulting your advisor as the writer may have the position in the above-given stocks or indices
