Tata Elxsi shares slip 4% as company posts smallest rise in profit in 15 quarters

Shares of Tata Elxsi declined over 4 per cent, touching the day's low of Rs 7,352.55 apiece. The stock witnessed a sell-off after the company released its June quarter numbers (Q1FY24) post-market hours on Monday, wherein it posted its smallest rise in profit in 15 quarters.

"On the marginal front, the numbers were disappointing. Even though the revenue has increased 17 per cent, earnings before interest, taxes, depreciation, and amortisation (EBITDA) have only risen 5 per cent," said Avinash Gorakshakar, Director of Research, ProfitMart Sec.

At around 11:40 AM, shares of Tata Elxsi were trading 2.22 per cent lower at Rs 7,539.45 apiece. The stock had made a 52-week low on December 26, 2022. The market capitalisation of the company is 46,945.85 crore.

Tata Elxsi Q1FY24 results 

On July 17, technology services firm Tata Elxsi posted an over 2 per cent year-on-year (YoY) rise in net profit at Rs 188.85 crore for the first quarter ended June 2023, its smallest rise in profit in 15 quarters. The company had registered a net profit of Rs 184.72 crore in the year-ago period.

The revenue from operations grew by 17 per cent to Rs 850.27 crore during the quarter from Rs 725.88 crore in the June 2021 quarter.

What should investors do? 

"The stock will trade in a small range for the next one or two quarters as the company will face challenges, and there won't be a big re-rating. Investors should hold the stock as the medium- to long-term prospects of the company are good," said Gorakshakar.

Brokerage's view 

Global brokerage Morgan Stanley has maintained an underweight rating on the stock with a target of Rs 5,700 apiece, which translates to a downside of 26.1 per cent from Monday's closing price.

According to the brokerage, management provided mixed commentary on the near-term demand outlook. Further, it said that the margins are resilient, but a higher tax rate can lead to a cut in estimates. Risk-reward unfavourable, it added.

JP Morgan has also maintained an underweight rating on the stock and has cut the target to Rs 4,500 from Rs 4,600, which implies a downside of 41.6 per cent from Monday's closing price.

According to the brokerage, EV is not charging growth, as expected, and June quarter results missed on revenues even as margins were ahead.

Tata Elxsi share price: Past performance 

So far in 2023, Tata Elxsi's stock has risen over 19 per cent against the Nifty 50's rise of over 8 per cent.

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