Tata Elxsi, a 36-year-old tech giant of Tata Group, witnessed massive selling pressure on Friday, January 10, so much so that the stock price nosedived by 8% on BSE. Investors turned bearish after Tata Elxsi reported weak performance in Q3FY25 and signalled at mixed outlook. Brokerage Kotak Institutional Equities has recommended selling the company after its Q3.

Tata Elxsi Share Price:

At the time of writing, Tata Elxsi’s stock traded at Rs 6020 apiece on BSE, down by 6.6% with a market cap of Rs 37,468.41 crore. Overall, in the day, the stock dipped by 8.06% to hit an intraday low of Rs 5924 apiece, which was its new 52-week low.

The stock’s price-to-equity ratio is at 49.58x, while the return on equity is at 32.55%.

Tata Elxsi Q3 Results:

The midcap IT company reported a lower net profit of Rs 190 crore in Q3FY25, compared to Rs 206.43 crore in Q3FY24 and Rs 229.43 crore in Q2FY25. Meanwhile, top-line performance was mixed with revenue from operations coming at Rs 939.17 crore in Q3FY25, which was higher than revenue of Rs 914.23 crore in Q3FY24, but lower from Rs 955.08 crore in Q2FY25.

Should You Buy Tata Elxsi Share Price?

According to Kotak Institutional Equities, Tata Elxsi reported flat qoq revenue growth (KIE: 0.5%) and 2.0% yoy in c/c terms. Revenue growth was weak across verticals. On a relative basis, healthcare & medical devices (1.1% qoq) outperformed, owing to consecutive quarters of sequential declines, while the transportation (0.5% qoq) and media & communications (0.4% qoq) verticals’ performance was muted. Among geos, Europe was down sharply, while the US declined as well (in US$ terms).

On a reported basis, revenues were at US$110.7 mn, down 2.9% qoq. The EBIT margin declined 160 bps qoq to 23.5% (KIE: 25.3%), primarily due to the impact of (1) a wage hike to senior employees and (2) currency fluctuations. Net profit was at Rs1.99 bn, down 13.3% yoy, partly aided by lower ETR, it added.

Furthermore, the brokerage highlighted that the weakness could linger for a couple more quarters in the transportation vertical. Green shoots emerging in the media & communications and healthcare verticals are a positive but could contribute meaningfully from the beginning of FY2026E.

Kotak expects 5.0% and 11.7% c/c revenue growth in FY2025E and FY2026E, respectively. Also, it expects a 200 bps EBIT margin expansion over FY2025-27E to 27%.

On the valuation, Kotak’s note said, “We lower our revenue estimates by ~4-10% due to continued headwinds at large automotive clients and gradual recovery in the rest of the business. We expect a healthy margin improvement (120 bps) in FY2026E, led by some improvement in growth and operating efficiencies. Our EBIT margin estimates are lower by 30-170 bps over FY2025-27E, leading to a significant earnings cut. Our DCF-based FV of Rs5,400 implies a 31X FY2027E P/E. We maintain a SELL rating on rich valuations and demand uncertainties. We like TELX’s strong capabilities in embedded engineering, but it needs to demonstrate success in leveraging capabilities to deepen relationships beyond a few large clients.”

About Tata Elxsi:

Tata Elxsi is amongst the world’s leading providers of design and technology services across industries including Automotive, Broadcast, Communications, Healthcare and Transportation.