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Tata Elxsi – Long-Term Investment Report for FY26 & Beyond

Lesson 46/225 | Study Time: 15 Min

Course: Top Quality Companies

Date: 28th July 2025

TataElxsi: FairValue with Profit From it Model

https://docs.google.com/spreadsheets/d/e/2PACX-1vRSzhfaAjiF1k83LOEAtU_n9uY8EWbuQMNw2tOH_AjV6bK_bJkdAYpQIcFtupm0Yw/pubhtml?gid=479192921&single=true

🌟 Company Overview:

Tata Elxsi, a part of the Tata Group, is a global design and technology services company catering to the automotive, media, communications, and healthcare industries. With over three decades of experience, Tata Elxsi has built a niche in embedded systems, AI, and software-led product engineering.

🌎 Industry Overview & Growth Outlook:

Tata Elxsi operates in the Engineering Research & Development (ER&D) services space, which is projected to grow significantly, driven by:

Automotive electrification & autonomous mobility
OTT and 5G growth in media & communications
Digital health and medical devices

India is emerging as a global hub for ER&D outsourcing, and Tata Elxsi stands to benefit from this secular trend.

⌚ Historical Financial Performance

📈 Income & Profit Growth (FY2000 - FY2025):

FY	Income (₹ Cr)	Profit (₹ Cr)
FY2000	124	-
FY2005	187	26
FY2010	378	48
FY2015	854	103
FY2020	1610	256
FY2023	3218	755
FY2025	3908	785

20-Year CAGR (FY2005–FY2025):

Revenue: ~18.4%
Profit: ~23.5%

🔢 Net Profit Margin (NPM %):

Improved from ~13% in FY2002 to a peak of 23% in FY2023
FY2025 NPM stands at 20%, showing cost pressure due to rising expenses

📊 Valuation History (High P/E - Low P/E)

FY	High P/E	Low P/E
FY2015	45	14
FY2020	27	12
FY2022	107	31
FY2025	72	41

P/BV Range: Historically between 4x – 37x; recent FY25 range: 11x – 20x

📉 Recent Performance Trend & FY26 Outlook:

🔹 Q1 FY26 vs Q1 FY25:

Revenue: ₹892 Cr (-3.7%)
Profit: ₹144 Cr (-21.7%)
Margin: 16.1% (vs 19.9% YoY)
EPS: 23.18 (vs 29.56)

⚠️ Key Observations:

Volume pressure in key verticals: Transportation (flat), Healthcare (-11%), Media (-8%)
Cost pressure due to employee expenses and material costs

📊 FY26 Estimates:

Metric	Estimate
Revenue	₹3869 Cr (-1% YoY)
Profit	₹623 Cr (-21% YoY)
EPS	₹100
Margin	16.1%

🌐 Long-Term Growth Projections

Year	Income (₹ Cr)	Profit (₹ Cr)	EPS (₹)	NPM (%)
FY26E	3869	623	100	16.1%
FY30E	6767	1232	197	18.2%
FY35E	13610	2478	397	18.2%

💲 Valuation Forecasts (EPS + BV Method)

Year	EPS	Low Price (₹)	Fair Value (₹)	High Price (₹)	Book Value (₹)	PBV Low	PBV Fair	PBV High
FY26E	100	2750	4172	5593	514	4206	6418	8630
FY30E	197	6245	8252	12645	686	6356	8571	13121
FY35E	397	15196	16599	28585	985	10891	12305	20227

🧑‍💼 Portfolio Weightage

Metric	Value
Current Price	₹6026
Based on EPS	0.48%
Based on BV	0.75%
Based on PEG	0.17%
Final Weightage	0.47% (moderate exposure)

✅ Conclusion: Long-Term Risk & Reward

Positives:

Tata Elxsi is a niche player in high-growth ER&D segments
Excellent track record of earnings growth and margin expansion
Debt-free balance sheet and strong cash flows

Risks:

Growth slowing in recent quarters
Elevated valuations (P/E ~60+) vs current growth
Global tech demand uncertainty and client budget cuts

Investor Takeaway:

Long-term investors may consider adding on dips
Accumulate only with a 5–10 year view, expecting a compounding EPS growth of ~15%
Re-entry zone could be ~₹4200–4500 based on historical valuations

📊 Disclosure:

This report is prepared for educational and informational purposes. It is not a buy/sell recommendation. Investors should do their own research and consult with a financial advisor before making investment decisions.

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Piyush Patel

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