Beaten-down stocks Part 8: Analysts see upside in Tata Elxsi from here

Information technology (IT) and software services company Tata Elxsi has emerged as a notable focus in the current market setting. Its share price has declined 32.7 per cent over the past year. Yet the stock brings together relatively low valuations, consistent earnings performance in recent quarters, and a return on net worth of 26.1 per cent. This mix offers investors downside protection in a weak market as well as scope for potential gains once sentiment improves.

 

India’s equity market overall has stumbled after two successive years of strong double-digit growth. The benchmark BSE Sensex slipped 4.8 per cent in the 12 months to September 2025, its weakest annual performance in more than a decade. This compares with a 28.1 per cent rise in the year to September 2024 and a 14.6 per cent increase in the preceding year. Consequently, the index has now reported negative returns in three of the past six years ended September.

 

 

The recent decline has, however, pulled valuations down from the record peaks of 2024. Several blue-chip counters are now trading at more attractive levels, offering opportunities for long-term investors. Even so, caution is warranted as valuations in the broader market remain above long-term averages, making careful stock selection important. 

 

Why buy Tata Elxsi? 

• Signs of recovery: Revenue fell 3.9 per cent sequentially in Q1FY26, but is slated to grow 1 per cent in Q2, signalling a gradual rebound.
• Margin outlook: Margins are expected to improve over the next three quarters, though they may stay below FY25 levels on an annual basis.
• Vertical strength: Transportation, which contributes 50 per cent of revenues, is stabilising with the JLR account and new strategic wins; media & communications may recover on consolidation deals.
• Strategic positioning: Strong client relationships, differentiated capabilities, and presence across verticals make Tata Elxsi well placed for sustained growth, says HDFC Securities.

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