STOCK IN FOCUS
* Tata Elxsi’s (TEL) stock rose 5.2% in yesterday’s trade, while the BSE Sensex rose 0.9%. f TEL’s revenue rose 5.4% QoQ in 2QFY19, with the key SDS business clocking 6% QoQ growth; YoY SDS revenue growth was a robust 20.7%, the fastest growth since 1QFY17. EBITDA margin declined 139bps QoQ despite INR depreciation, owing to wage hike impact.
* The addressable size of the ER&D industry will cross US$300bn, while offshore ER&D spend will clock 9% CAGR, with TEL likely to grow at a much faster pace.
* TEL’s presence in specialised verticals like Automotive and Broadcast will be key growth drivers, going forward.
* TEL’s core strengths lie in high growth solutions like IoT, Robotics, Automation, Mobility, VR/AR Digital Experience, Cloud and AI platforms.
* TEL counts names like BMW, Mercedes-Benz, JLR and Tata Motors as clients. TEL has presence across the value chain of Broadcast & Media vertical and counts clients from different segments of broadcast ecosystem.
* We expect TEL’s PAT to clock a healthy 22.1% CAGR over the period FY18-FY20E. f We have a BUY rating on TEL and Target Price of Rs1,440.
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