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HDFC Securities Institutional Equities
Tata Elxsi Ltd.'s performance continued to exhibit a similar trend of strength in the transportation vertical (56% of revenue), offset by weakness in the media and communications vertical and the healthcare vertical.
Growth in T5 declined sequentially, a first in three years. Deal momentum in Transportation (including $50 million total contract value deal) and an increased mix of original equipment manufacturers can maintain the growth outperformance.
While the healthcare vertical can recover by FY25Eend, media and communications could take longer. We continue to believe that T1 client growth momentum and OEM sub-segment within the transportation segment will drive the bulk of the growth over FY24-26E.
While the growth trajectory is expected to improve ahead, valuations are still a stretch; maintain Reduce with a target price of Rs 6,925, based on 38 times Dec-26E earnings per share.
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