Tata Elxsi hits fresh record high; stock surges 42% in one month

In the past three months, it has zoomed 88 per cent as against 7 per cent gain in the benchmark S&P BSE Sensex index

Shares of Tata Elxsi moved higher to its fresh record high of Rs 1,710, up 6 per cent on the BSE on Friday. In the past one month, the stock of the information technology (IT) software services company has rallied 42 per cent, as compared to 8 per cent rise in the S&P BSE Sensex. In the past three months, it has zoomed 88 per cent as against 7 per cent gain in the benchmark index.

Tata Elxsi, a Tata group company, is amongst the world's leading providers of design and technology services across industries including automotive, broadcast, communications, healthcare and transportation.

On October 14, 2020, Tata Elxsi had reported a strong 58.4 per cent year on year (YoY) growth in net profit at Rs 79 crore in the July-September quarter (Q2FY21). The company's operational revenues grew 11.5 per cent YoY at Rs 430 crore. The company's growth was driven by both its key businesses – Embedded Product Design (EPD) and Industrial Design & Visualisation (IDV).

Ebitda (earnings before interest, taxes, depreciation, and amortization) for the quarter was up by 67.8 per cent YoY to Rs118 crore while Ebitda margins expanded by 920bps YoY to 27.4 per cent due to decrease in raw material costs and other expenditure.

The management said it is seeing some recovery in the automotive market. The company has closed some large deals, including a multi-year deal with a European Tier1 supplier for vehicle electronics and software. The company has also added new automotive customers including a new OEM (Original Equipment Manufacturer), it said.

"We are going into the second half of FY21 with a strong deal pipeline across geos and verticals, and a significant number of large deals that we are pursuing. We are back to our pre-Covid momentum and expect this momentum to continue into H2 FY21", said Manoj Raghavan, CEO and Managing Director.

Brokerage firm Motilal Oswal Financial Services remains 'Overweight' on the IT sector despite the sharp outperformance in CY20. Strong relative earnings performance, coupled with resilient sector fundamentals, underpin our continued positive stance on the sector. Covid-19 has served as a tailwind for the Indian IT sector, with enterprises accelerating investments in digital transformation to stay resilient in a disruptive business backdrop.

Commentaries from IT companies (which have declared 2QFY21 earnings) suggest robust deal momentum and strong cost control, with several companies upping their guidance, it said in a sector update.

At 11:53 am, Tata Elxsi was trading 4 per cent higher at Rs 1,668 on the BSE, as compared to 0.24 per cent rise in the S&P BSE Sensex. A combined around one million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.