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Tata Elxsi reported mixed financial results in Q1 FY25. Despite year-on-year revenue growth, the company suffered a decline in net profit, led by higher expenses and increased tax rates. This report provides a comprehensive analysis of Tata Elxsi’s Q1-FY25 performance, including key financial metrics, segment-wise performance, and market reactions.

Tata Elxsi Key Financial Metrics

Tata ELXSI Detailed Analysis

1. Revenue and profit

– Revenue from operations: Tata Elxsi revenue grew 9% to ₹ 926 crore from ₹ 850 crore in Q1 FY 2024. Sequentially, the revenue grew 2% from the previous quarter.

– Net Profit: Net profit for the quarter declined 3% to ₹184 crore from ₹189 crore compared to the same quarter last year. Sequentially, net profit declined 6% from ₹196 crore.

2. Expenses and Margin

– Total expenditure: Total expenses increased 13% year-on-year to ₹ 706 crore from ₹ 624 crore.

– EBITDA and Margin: EBITDA for the quarter stood at ₹ 252 crore, stable year-on-year but down 3% sequentially. EBITDA margin declined 162 basis points quarter-on-quarter to 27.2%.

Segment wise performance

1. Transportation

– Development: The transport sector recorded robust growth of 5% quarter-on-quarter and 20% year-on-year in constant currency.

– Contribution: This segment now accounts for over 50% of Tata Elxsi’s software development and services business.

– Driver: This growth was driven by significant deal wins and growth in Software Defined Vehicles (SDVs).

2. Media and Communication

– Development: The Media & Communication business grew 0.9% quarter-on-quarter in real currency and 0.5% in constant currency.

– Environment: This growth was achieved despite the challenging business environment in the media and telecom industry.

3. Healthcare and Life Sciences

– Declination: The Healthcare & Life Sciences business witnessed a decline of 4.3% quarter-on-quarter in constant currency.

– Reason: This decline was primarily due to delays in renewals of certain projects involving large customers.

4. System Integration Services

– Development: The segment recorded a robust growth of 8.7% quarter-on-quarter in constant currency.

Overview

Market response

– Share the performance: Following the results, the share price of Tata Elxsi rose 1.43% to close at ₹ 7,118.80 on July 10. However, the shares declined over 2% in early trade on July 11.

Brokerage Opinion

– Kotak Institutional Equities: Maintained sell recommendation, raised target price to ₹ 5,500, implying a downside of 22%.

– JP Morgan: Retained Underweight call with a price target of ₹ 5,800, implying a downside of 18.5%. JPMorgan noted positive surprises in the transportation sector but anticipated headwinds in the healthcare business, leading to a 2-4% cut to earnings estimates over FY25-27 due to higher tax rates.

Comments by CEO of Tata Elxsi

CEO and Managing Director Manoj Raghavan highlighted the company’s operational excellence and financial discipline despite facing an increase in effective tax rates due to exceptional one-time expenses and a shift in SEZ benefits. He expressed confidence in capitalising on growth opportunities in the coming quarters, supported by a healthy deal pipeline and continued strength in the transportation business.

Tata Elxsi Financial

conclusion

Tata Elxsi’s Q1 FY25 results reflect a balanced performance with significant growth in key sectors such as transportation despite challenges in the healthcare and life sciences sectors. The company’s strategic focus on operational efficiency and disciplined cost management positions it well for future growth, although market reactions and brokerage analysis suggest cautious optimism with anticipated challenges ahead.