InCred Equities upgrades Tata Elxsi stock to 'Hold', lifts target to ₹5,639

InCred Equities has upgraded Tata Elxsi to ‘Hold’ from ‘Reduce’ and raised its target price to ₹5,639 from ₹5,486, on the back of improving visibility in the transportation vertical, stable trends in media, and margin tailwinds from operating leverage and currency movement. The brokerage believes that the key concerns highlighted earlier are now largely priced into the stock.

 

“Finally, we upgrade our rating on the stock to Hold (Reduce earlier) as the underlying thesis highlighted in our coverage initiation report is likely priced in,” said Abhishek Shindadkar, research analyst at InCred Equities, in a note dated December 22.

 

Following recent preview discussions, InCred Equities analysts noted better comfort around demand traction in Tata Elxsi’s transportation vertical during the second half of FY26, driven by the ramp-up of deals closed earlier and a recovery in Jaguar Land Rover (JLR). The brokerage highlighted that the transportation business could have reported positive constant currency growth in the September quarter, excluding the impact of the cybersecurity incident.

 

 

The automotive business unit, which contributes around 53 per cent of Tata Elxsi’s revenue, is seeing signs of stabilisation. Analysts pointed to easing client-specific challenges, recovery in spending, traction across most geographies except the US, and an increase in deal ramp-ups. It also noted a structural shift, with OEMs increasingly opting for long-term technology partners instead of vendor consolidation. Spending on software-defined vehicles (SDV), advanced driver assistance systems (ADAS), electric vehicles, and cockpit solutions continues to support demand. Partnerships with Suzuki and a deal win with Mercedes-Benz further add to medium-term visibility, according to the report.

 

On the media and communications vertical, InCred Equities said growth in recent quarters was led by new wins and ramp-up of previously announced deals. However, the business continues to face volatility due to restructuring and M&A activity among global operators and broadcasters. While the ramp-up of existing deals over several quarters could help sustain momentum, spending challenges at key customers may result in a sequential revenue decline, prompting InCred to fine-tune its estimates.

 

The healthcare vertical, meanwhile, saw a sequential decline in Q2FY26 following the closure of large regulatory and medical device reporting (MDR) programmes. InCred Equities expects growth recovery to be uneven, hinging on a strong pipeline of new customers and large deal wins across key regions.

 

From a profitability perspective, the brokerage expects growth leverage, utilisation improvement, and depreciation of the Indian rupee to aid Ebit margin execution over the coming quarters. Based on updated assumptions, InCred Equities revised its revenue and earnings estimates for the second half of FY26, rolling into FY27.

 

The brokerage now models a US dollar revenue CAGR of 6.2 per cent and PAT CAGR of 7 per cent over FY25-FY28, marginally higher than earlier estimates. These revisions led to an increase in the discounted cash flow (DCF)-based target price.

 

Analysts further highlighted that upside risks include faster resolution of account-specific challenges, growth acceleration from large transportation and media deals, and stronger-than-expected margin recovery. Persistent client-specific issues, however, remain a key downside risk.

 

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