Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Tata Elxsi - Q1FY22 Result Update - Diminishing margin of safety - HDFC Securities

Posted On: 2021-07-18 06:25:12 (Time Zone: UTC)

Mr. Apurva Prasad, Institutional Research Analyst, HDFC Securities and Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities

We downgrade Tata Elxsi (TELX) to REDUCE (ADD earlier), based on diminishing margin of safety at 43x FY23E and following an in-line Q1 (both revenue and margin). While we remain positive on the company's prospects and growth leadership in ER&D (24/26% revenue/EPS CAGR over FY21-24E), the unfavourable risk-reward can be construed from (1) concentrated growth pockets with ~25% of business driving ~50% of growth (IDV and medical devices-EPD), (2) reducing growth premium vs. ER&D peer, and (3) the fact that its margin is currently at a peak (32.8% EBITDA margin adj. for Q1 one-time) and increase in discretionary spend is on the anvil. The near-term prospects remain strong with FY22 revenue growth expected at 33%, which would subsequently normalise to 20%. Our TP of INR 4,200 is based on 40x Jun-23E EPS (similar to our bull case scenario at the time of initiation), supported by an EPS CAGR of 26% over FY21-24E.

Q1FY22 highlights: (1) Revenue: TELX' revenue growth was 6.4% QoQ CC and 37.4% YoY CC at a strong (but reducing) growth premium to ER&D peer (LTTS). (2) Segmental growth: EPD (84% of revenue) grew 6.4% QoQ CC, which included transportation growth at 2.2% QoQ CC, broadcast & comms at 6.7% QoQ CC, and healthcare & medical at 18.5% QoQ CC. (3) Margin: EBITDA margin declined 555bps QoQ to 26.9%, impacted by a one-time bonus salary payout of INR 0.33bn in Q1 (similar quantum expected in Q3), excluding which, the margin improved 36bps QoQ to 32.8%, led by higher utilisation and better offshore mix. TELX will roll out a wage hike in Q2FY22 at ~7-8% (similar to FY21). (4) TELX had a strong net headcount addition of 552 in Q1 and attrition increased 280bps QoQ to 10.2%. (5) Management commentary included a strong order book and healthy deal wins (multiple strategic partnerships).

Outlook: We have factored in the USD revenue growth of 33/21/20% for FY22/23/24E, factoring in EPD growth of 27/20/19% and IDV growth of 96/25/22%. EBITDAM has been taken at 28.2/28.8/27.8% for FY22/23/24E, translating into a 26% EPS CAGR over FY21-24E. Following the recent stock performance (45/82% in 3M/6M), TELX trades at 43x FY23E.

Shares of TATA ELXSI LTD. was last trading in BSE at Rs.4302.55 as compared to the previous close of Rs. 4487.2. The total number of shares traded during the day was 62162 in over 12285 trades.

The stock hit an intraday high of Rs. 4469.8 and intraday low of 4200. The net turnover during the day was Rs. 270596338.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Godrej Properties - Positives priced in - HDFC Securities

Maintain ADD on Dabur - Outperformance continues; strategies playing out - HDFC Securities

Orient Cement - On a strong footing - HDFC Securities

Kajaria Ceramics - Cost controls cushion margin hit - HDFC Securities

Maintain REDUCE on Emami - Sustaining expectation; margin base to impact FY22 - HDFC Securities

Bharti Airtel - Earnings Update - Inline - YES Securities

Tata Consumer - Q1 FY22 result first cut - YES Securities

Dabur India Ltd - Q1 FY22 Result Report - YES Securities

Castrol India Ltd - Q2 CY21 Result Report - YES Securities

Sunteck Realty Ltd - Q1 FY22 Result Report - YES Securities

Top brokerage houses have given 'subscribe' rating for Windlas Biotech Ltd IPO

Maintain BUY on Cholamandalam Investment and Finance Company - HDFC Securities

Maintain REDUCE on Britannia Industries - Beat on revenue; in-line EBITDA - HDFC Securities

Aditya Birla Fashion and Retail - Recovery better than expected - HDFC Securities

Vinati Organics Limited - High input costs dent margins - HDFC Securities

Q1FY22 Result Update - Colgate-Palmolive (India) - ICICI Direct

Q1FY22 Result Update - Tech Mahindra - ICICI Direct

Q1FY22 Result Update - Gateway Distriparks - ICICI Direct

Q1FY22 Result Update - Filatex India - ICICI Direct

Q1FY22 Result Update - KPR Mill - ICICI Direct

Q1FY22 Company Update - Mahindra Lifespace Developers - ICICI Direct

Maintain ADD on V-Guard Industries - Loss of peak season sales, state mix impact the show - HDFC Securities

Maintain REDUCE on RBL Bank - The pitfalls of 'banking' on a single engine - HDFC Securities

Maintain BUY on NTPC - Asset monetisation on the cards - HDFC Securities

Krsnaa Diagnostics Ltd. - IPO - Heathy Business Outlook with Sound OCF - Reliance Research

KEC International - Muted performance - HDFC Securities

Maintain BUY on Kansai Nerolac - GM pressure palpable - HDFC Securities

Auto Sector - July 2021 Sales - Acuité Ratings & Research

Indian Oil Corporation - Muted performance - HDFC Securities

Cholamandalam Investment & Finance - Q1 FY22 Result Report - YES Securities

HDFC Limited - Q1 FY22 Result Report - YES Securities

RBL Bank - Q1FY22 Result Update - YES Securities

Oberoi Realty Ltd - Q1 FY22 Result Report - YES Securities

Emami Ltd - Q1 FY22 Result Report - YES Securities

Britannia Industries - Q1 FY22 Result Report - YES Securities

Indian Oil Corp. Ltd - Q1FY22 Result Report - YES Securities

Container Corporation - Good results; ICD Khatuwas now connected to DFC - HDFC Securities

Maintain ADD on Marico - Food remains a showstopper; expect margin recovery - HDFC Securities

Maintain REDUCE on LIC Housing Finance - It's all going pear-shaped - HDFC Securities

JSW Energy - Adj PAT in line, but valuation remains stretched - HDFC Securities

JK Lakshmi Cement - Q1 hit by lower sales and fuel inflation; outlook bright - HDFC Securities

Upgrade to BUY on Sun Pharma - Strong beat, encouraging trends in specialty - HDFC Securities

Maintain ADD on Shriram Transport Finance Company - Cumulative stress on par with bellwether peer - HDFC Securities

EXIDE 1QFY22 - first cut - Weak margins drag PAT - Not rated - YES Securities

IOCL - 1QFY22 earnings update - YES Securities

Dr Lal PathLabs - Q1 FY22 first cut - Beat across the board - YES Securities

Chola Q1 FY22 first take - Strong PPOP show, but dejects on asset quality - YES Securities

Britannia - Q1 FY22 results first cut - YES Securities

Shriram City Union Finance Ltd - Q1 FY22 Call Highlights (Not Rated) - YES Securities

Sun Pharma - Q1 FY22 Result Report - YES Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020