At 52-week low! Tata Elxsi shares tank 8% as Q3 results miss Street estimates, profit declines
Tata Elxsi shares fell nearly 8% on January 10 after Q3FY25 results missed expectations. Net profits declined 3.5% to ₹199 crore while revenues rose 3% to ₹939.17 crore. The CEO highlighted growth in India and emerging markets amidst global challenges.
Shares of Tata Elxsi crashed 8 percent in morning deals on Friday, January 10 after the company missed Street estimates in the third quarter (Q3FY25) results.
The stock fell as much as 8 percent to its 52-week low of ₹5,924. The IT stock is now almost 35 percent away from its 52-week high of ₹9,082.90, recorded in August 2024.
Tata Elxsi announced a 3.5 per cent fall in net profit to ₹199 crore in the October to December quarter results of the financial year 2024-25, compared to ₹206.43 crore in the same quarter the previous year, according to the company's exchange filing. The software and consulting firm's revenue from core operations rose 3 per cent to ₹939.17 crore in the third quarter, compared to ₹914,23 crore in the same quarter the previous year.
However, total expenses surged 7 percent YoY to ₹723 crore, driven by higher employee benefit costs and increased material expenses, as stated in the company’s exchange filing.
Despite these challenges, the management expressed optimism about navigating geopolitical uncertainties and leveraging growth opportunities.
Management Commentary
Manoj Raghavan, CEO and Managing Director of Tata Elxsi, highlighted the company's strategic focus on growth markets.
“We continue to see positive outcomes of our strategic business focus on Japan, emerging markets and capitalising on the India opportunity. During the quarter, our revenue from India has grown by 21.9 per cent YoY, while Japan and emerging markets grew at 66.8 per cent YoY. This will serve us well over the next few quarters even as we navigate geopolitical uncertainty, currency volatility and industry specific challenges in Europe and US,” said Manoj Raghavan the chief executive officer (CEO) and managing director of Tata Elxsi.
On a segmental basis, revenue from development and services increased 3.3 percent YoY, while revenue from system integration and support services dropped 18.2 percent YoY during Q3 FY25.
Brokerage Reaction
The weakness was also aided by Morgan Stanley's downgrade of Tata Elxsi to an "underweight" rating and reduced the target price to ₹6,000 per share, down from ₹6,500. The brokerage firm cited weaker-than-expected Q3 results and challenges in the European transportation, media, and healthcare sectors as reasons for the downgrade.
Morgan Stanley noted that limited growth visibility, coupled with high valuations, has led to a downward revision of consensus estimates.
"With Q3 results falling short of expectations and weakness in key markets, we anticipate limited growth prospects for the company and expect the stock to underperform," the firm stated.
Tata Elxsi is a leading design and technology services provider, which operates across industries such as automotive, broadcast, communications, healthcare, and transportation. The company’s ability to navigate market challenges while maintaining a strategic focus on high-growth regions will be crucial in determining its performance in the coming quarters.
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