Tata Elxsi’s shares plummeted by 8% following a disappointing Q3 performance. In response to this, Morgan Stanley downgraded the stock and reduced the target price
Shares of Tata Elxsi plummeted by 8 percent to Rs 5,935 per share on January 10th following the company’s disappointing results for the October-December quarter (Q3FY25), which fell short of Street estimates. Consequently, analysts at Morgan Stanley downgraded the stock to an underweight rating and lowered their target price to Rs 6,000 per share from Rs 6,500.
The lackluster Q3 results, coupled with weaknesses in the European transportation, media, and healthcare sectors, have led the brokerage firm to anticipate limited growth prospects for Tata Elxsi in the future, expecting the stock to underperform. Morgan Stanley highlighted the company’s limited growth visibility and high valuations as reasons for reducing consensus estimates.
Tata Elxsi’s net profit for Q3FY25 declined by 3.5 percent year-on-year (YoY), dropping to Rs 199 crore from Rs 206 crore in the same period last year. Revenue from core operations increased by 3 percent YoY to Rs 939 crore. However, total expenses rose by 7 percent YoY to Rs 723 crore, driven by higher employee benefit costs and increased material expenses.
On a segment basis, revenue from development and services grew by 3.3 percent YoY, while revenue from system integration and support services fell by 18.2 percent YoY in Q3FY25. Despite the challenges, the management remains confident in navigating geopolitical uncertainties in the upcoming quarters.
Manoj Raghavan, CEO and Managing Director of Tata Elxsi, stated, “During the quarter, our revenue from India grew by 21.9 percent YoY, while Japan and emerging markets saw a growth of 66.8 percent YoY. This strong performance will support us in the coming quarters as we navigate geopolitical uncertainty.”
Over the past three months, Tata Elxsi shares have dropped by over 15 percent, compared to the benchmark Nifty 50.
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