Despite announcing a dividend of Rs. 70 per equity share, Tata Elxsi share price slumped over 3%. The dip comes in the wake of the company’s Q4 results, where it reported a 4.6% drop in net profit sequentially compared to the previous quarter.
Tata Elxsi, which had seen significant growth over the years, experiencing more than a 50-fold increase from Rs 200 per share in 2014 to over Rs 10,000 in August 2022, has faced correction since then. The stock is down over 20% from its highs in December 2023.
The broader sentiment towards IT companies remains weak, fueled by expectations of limited earnings improvement in the near term. While growth prospects for FY25 are anticipated.
The Board of Directors of Tata Elxsi declared the dividend of Rs 70/share for the financial year 2023-24 following the March 2024 quarter. However, this announcement failed to bolster investor sentiment as the company’s share price continued to slide.
The intensity is expected to be lower than previously estimated. Additionally, tepid revenue growth outlook and temporary margin compression in some companies contribute to the subdued sentiment.
Tata Elxsi in Q4FY24
In Q4FY24, Tata Elxsi witnessed a 4.6% decline in net profit to Rs 197 crore from Rs 206.4 crore in Q3FY24. Year-on-year, the net profit also saw a 2.3% decrease. The operational revenue for the quarter dipped by 1% to Rs 906 crore from Rs 914.2 crore in the December quarter, yet showed an 8.1% increase compared to the same period last year.
The company’s operational Ebitda for the March quarter stood at Rs 233.7 crore, marking a 4.5% decrease from Rs 244.7 crore in the December quarter.
Analyst on Tata Elxsi
“Tata Elxsi posted a soft quarter (Q4FY24) with a ramp-down in a Media and Communication client and a delayed program ramp-up in the Transportation vertical. TELX’s growth has normalised, impacted by market-share loss in the transportation vertical (50% of its revenue) on account of a higher mix of Tier-1s vs original equipment manufacturers (OEMs), increased captive intensity, business mix challenges in the Healthcare vertical and macro factors impacting media and telco enterprise client spend,” said Atul Parakh, CEO of Bigul.
Parakh also added that moving forward, The company is focusing on integrating the sales/front end of the erstwhile embedded product design (EPD) and industrial design and visualisation (IDV) business to drive larger deals. Brokerages have still maintained an underweight call on Tata Elxsi
InCred Equities on Tata Elxsi
According to a report from InCread Equities, Tata Elxsi encountered a slight revenue setback in 4QFY24F, with a 0.6% quarter-on-quarter decline. However, on a yearly basis, there was a notable 7.2% increase in constant currency.
This dip was chiefly attributed to reduced business from a single media client within the Media & Communication vertical, experiencing a 4% quarter-on-quarter decline in constant currency.
Additionally, the report said growth in the Transportation vertical was hindered by delays in deal ramp-up, resulting in a modest 1.2% quarter-on-quarter increase in constant currency. The company’s EBIT margin saw a decline of 97 basis points quarter-on-quarter to 25.8%, primarily due to the revenue setback and investments in capabilities.
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