Shares of Tata Elxsi fell 7.9% on Friday, closing at Rs 5,935.05 on the BSE. The decline followed the company’s Q3 FY25 announcement, which revealed a three per cent year-on-year (YoY) profit decline to Rs 199 crore, compared to Rs 206 crore in the same period last year. Operating income, however, showed a YoY growth of three percent, reaching Rs 939 crore.
Brokerages lower price targets mean weaker performance
Brokerage firms reacted quickly to Tata Elxsi’s earnings report, cutting their prices. Morgan Stanley revised its target to Rs 6,000, down from Rs 6,500, and maintained “Underweight” rating. Similarly, JPMorgan lowered its price target to Rs 5,400, citing expectations for revenue and margins for the two consecutive quarters. EBIT margin for Q3 fell by 160 basis points QoQ, leading to further contraction in earnings estimates.
Work storms in key sectors
The company’s auto segment, a major revenue driver, has faced significant challenges. Slow growth in the US and European markets contributed to deal closures and reduced spending by Tier 1 suppliers. Delays in decision-making for major projects also dragged down the performance of the systems integration division.
Meanwhile, the healthcare and life sciences segment registered a sequential growth of 1.1 percent, boosted by new customer acquisition and adoption of Gen AI-driven solutions. Despite the headwinds, Tata Elxsi secured a multi-year deal with a US MSO, indicating long-term growth potential.
Strategic focus amid industry challenges
Manoj Raghavan, CEO and MD of Tata Elxsi, emphasized the company’s commitment to growth in Japan, emerging markets and India. The media and communications business showed resilience with consistent cash flow growth despite the general furlough-related slowdown.
Market reaction and outlook
Tata Elxsi’s stock has struggled in recent months, down 25.49 percent over the past year and underperforming its sector by 58.46 percent. Despite these challenges, the company has delivered a 660 percent profit in five years.
As investors weigh Tata Elxsi’s near-term hurdles against long-term strategic bets, all eyes are on management’s ability to navigate industry disruptions and deliver margin improvements.
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