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Published on 19/10/2018 11:42:59 AM | Source: Reliance Securities Ltd

Buy Tata Elxsi Ltd For Target Rs.1,440.00 - Reliance Sec

Posted in Broking Firm Views - Short Term Report| #IT Sector #Tata Elxsi Ltd. #Trading Report #Reliance Securities Ltd

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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