InvestorQ : I understand that Tata Elxsi has posted very flat numbers this quarter. Should I look to buy this stock at this point of time since it is part of the Tata group?
Anjana Aiyar made post

I understand that Tata Elxsi has posted very flat numbers this quarter. Should I look to buy this stock at this point of time since it is part of the Tata group?

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Deepa Salunkhe answered.
2 years ago
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Tata Elxsi operates in the very high end of technology and design and there have been talks about a restructuring of the group companies. That has not happened till date.

Tata Elxsi Ltd fourth quarter results

The company in the fourth quarter reported 8% higher net sales at Rs.405 crore and the net profits were up by just 1.4% at Rs.71.29 crore. The big advantage in the company for any investor is that it operates on a net margin of between 55% and 60% on a consistent basis. The EBITDA for the quarter was marginally down on cost pressure concerns in the last quarter. The pressure on profit growth in the quarter has largely come on the back of higher input costs in the period.

Is Tata Elxsi worth a buy now?

On an annualized EPS of Rs.45 on a rolling basis, the stock current quotes at around Rs.930 giving a historical P/E ratio of just a little over 20X. For a company focused on the high end technology segment, this is a very reasonable valuation. Also the pressure of costs should cycle out in the coming quarters. The stock is down nearly 21% in the last 1 year and nearly 40% down from its annual peak price. At this price, we don’t see any downside risk in the stock. The company is well poised to benefit from the auto driven cars segment and that could be the big traction. Suggest buying the stock at current valuations from an investment perspective.

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