Sharekhan recommends to BUY this Tata Group multibagger computer stock


Tata Elxsi Ltd (TEL) is an IT company with a market capitalization of 53,547.15 crore. Tata Elxsi shares rose from 3809.60 to 8,576, resulting in a multibagger yield of 125.12% in one year. So far in 2022, the stock has returned 45.51% to its shareholders. The last share price of 8,576 is above the 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. Sharekhan has assigned a buy rating to Tata Elxsi shares, with a target price of Rs. 9,750, indicating a potential upside of 13% from the share’s last traded price.

Sharekhan said in a note that “Tata Elxsi Limited’s (TEL) annual report for the financial year 2022 highlighted its differentiated offerings and design-driven approach in certain industries, increasing focus on platform businesses. -shape based on subscribers, offshore delivery capabilities, and industry tailwinds. increase in DRE expenditure. According to Zinnov, the share of Indian DRE service providers is expected to increase from $16 billion in 2021 to $58 billion in 2031, implying a CAGR of over 13%. range of services focused on digital engineering, its robust platform portfolios, deep domain expertise and strong offshore delivery capability, we believe that Tata Elxsi would be one of the main beneficiaries among global peers of the current round of DRE spending.

“Management remains optimistic about maintaining a higher offshore mix in FY2023E (90% in Q4FY2022) given its strong delivery model and cost savings for customers, although we believe mix will decline slightly in FY2023E due to the opening of travel Attrition is expected to slow going forward given increased startup layoffs, hiring freezes and new hires at industry-wide (during fiscal year 2022) In addition, the company advanced salary increases in January 2022 (which covered 65-70% of the workforce) from July (7-8% salary increase in 2021), which would benefit TEL in fiscal year 2023E We believe the company will continue to deliver leading margin in fiscal year 2023E, driven by price, higher offshore mix, pyramid balancing and currency tailwinds,” said clarified the brokerage.

Sharekhan stated in his research report that “TEL is well positioned to seize market opportunities in selected industries given its unique design-driven engineering capabilities. TEL’s USD revenue and profit is expected to recording a CAGR of 23% and 20%, respectively, in fiscal years 2022-2024E Under our coverage, Tata Elxsi is the only company whose stock market performance (up 22%) significantly outperformed CNX IT (down 22%) 17%) over the past three months despite interest rate hikes by the US Federal Reserve, rising inflation in developed markets, Russia – Conflict in Ukraine and potential recession in the US At CMP , the stock is trading at 78x/67x earnings FY2023E/FY2024E, which is expensive.However, we continue to prefer TEL given its strong growth potential, market share gains, growth profile upper margin earlier, its differentiated digital engineering capabilities and strong balance sheet (cash and capex accounted for 51% of total assets). We maintain a Buy rating on TEL with a revised price target (PT) of Rs. 9,750.”

The opinions and recommendations made above are those of individual analysts or brokerage firms, and not of Mint.

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