Tata Elxsi – Financials, Future Plans
Fundamental Analysis of Tata Elxsi:
The shares of Tata Elxsi went up more than 10x from their June 2020 levels in less than 2 years. The stock recorded its all-time high of Rs 10,760 in August last year. However, the performance has been dismal since then with the stock coming down to Rs 7,750. So what really happened at the company? Such a boom and then some 30% fall? What can present and future investors expect in the coming quarters? We’ll attempt to answer these and other questions by performing a fundamental analysis of Tata Elxsi.
Company Overview:
Owned by the salt-to-software conglomerate the Tata Group, Tata Exlsi was founded more than three decades ago in 1989. It was established to provide electronic, embedded systems and software application development services.
Fast forward to today, it is one of the leading companies in design and technology services. It employs over 11,000 people and has a strong presence in more than 16 countries. Over the past several years, the technology company has built several in-house platforms to service its clients.
Tata Elxsi has three key verticals:
automotive, media, broadcast & communications, and healthcare. It provides a broad range of technology services including software development and allied services under these verticals.
Segment Analysis:
Tata Elxsi segregates its services into two operating segments: software development & services and system integration & support services. The latter is rather small in size than the former. Furthermore, its contribution to the total EBIT share is negligible at 0.4% only.
Industry Overview:
As per data from NASSCOM, the revenue of the Indian industry is projected to grow fast and reach $ 41 billion in value in 2023. It is a 13.9% year-on-year growth of over $ 36 billion the industry attained in the 2021-22 period.
The rapid growth is driven by higher spend by corporations across the globe. Among other industries, automotive, telecom and medical devices are seeing record deals putting Tata Elxsi in a sweet spot as it provides design-led & services within these key verticals.
Furthermore, the sector is experiencing a big shift as clients are increasingly taking maintenance, regular updates, and data analytics services as well. This is a big shift from the erstwhile design and deployment model. The transformation has helped players in increasing the product life cycle, consequently opening up multiple monetisation areas.
Tata Elxsi – Financials
Revenue and Net Profit Growth
The revenues and net profits of Tata Elxsi grew at a fast pace in the last three financial years. All three verticals of Tata Elxsi saw explosive growth in the recent fiscals. The recovery in the automobile industry, rising healthcare spending in the wake of the Covid-19 pandemic and growth of OTT platforms aided the company to record higher sales.
Future Plans of Tata Elxsi:
So far we looked at the previous fiscals’ data for our fundamental analysis of Tata Elxsi. Let us try to get a sense of what lies ahead for the company and its investors.
The management of Tata Elxsi is optimistic about the opportunities arising from software-defined vehicles and Advanced Driver Assistance Systems (ADAS) as OEMs focus extensively on crafting in-vehicle experiences for buyers.
The company has expertise in customer premises equipment (CPE) like set-top boxes and gateways giving it an added advantage to tap the growth of ongoing on-demand video and OTT platforms segments.
Conclusion:
As we conclude our fundamental analysis of Tata Elxsi, we can say that the business happened to be in a fast-growing space as the respective industries grew fast on a low base and changing dynamics. Going forward, it will be interesting to see whether the company will be able to continue its pace of growth.
