Tata Elxsi Share Price Drops on Weak Q1 Results; Brokerages Forecast 22% Downside

Tata Elxsi shares dropped by over 2% in early trading on July 11 following the Tata group firm's announcement of a 3% decline in net profit for the first quarter of the 2024-2025 financial year.

The company reported a net profit of ₹184 crore for this quarter, down from ₹188 crore in the same period last year. However, revenue from operations increased by 9% in the June quarter, reaching ₹926 crore compared to ₹850 crore in the corresponding quarter of the previous fiscal year.

As of 9:17 am IST, Tata Elxsi share price were trading at ₹6,950.1 on the NSE, marking a 2.4% decrease from the previous session's closing price.

Kotak Institutional Equities noted that Tata Elxsi's earnings slightly surpassed its expectations in terms of revenue growth and profitability. Revenue grew by 2.4% sequentially, driven by significant deal ramp-ups and strong performance at JLR.

Despite this, the brokerage maintained its Sell rating, raising the target price to ₹5,500, which suggests a potential downside of 22%. Kotak stated, "The company has exercised tight cost control and focused on operational efficiencies. We believe management will prioritize reinvesting in growth initiatives, and we do not anticipate significant upside from current levels."

Similarly, international brokerage JPMorgan maintained its Underweight rating on Tata Elxsi, setting a target price of ₹5,800, implying a downside of approximately 18.5% from the previous close. The healthcare division suffered due to delays in renewal from a major US client, while the transportation sector showed improvement due to large deals progressing.

JPMorgan mentioned that the positive developments in Tata Elxsi's transportation segment will be counterbalanced by challenges in the healthcare business. Consequently, the brokerage reduced its earnings estimates by 2-4% for FY25-27 due to higher tax rates.

Tata Elxsi Limited, part of the Tata Group, was established on March 30, 1989, as Tata Elxsi (India) Ltd. The company provides global design and technology services for product engineering and solution services across various industries, including Automotive, Broadcast, Communications, Healthcare, and Transportation.