Tata Elxsi Ltd

(BSE Code: 500408) (CMP: Rs.1008.7) (FV: Rs.10) (TGT: Rs.1170+) By Amit Ku­mar Gupta

Money Times - - Stock Watch -

In­cor­po­rated in 1989, Ben­galuru-based Tata Elxsi Ltd (TEL) op­er­ates through two seg­ments: Soft­ware Devel­op­ment and Ser­vices; and Sys­tems In­te­gra­tion and Sup­port. It of­fers tech­nol­ogy con­sult­ing, new prod­uct de­sign and devel­op­ment and test­ing ser­vices for broad­cast, con­sumer elec­tron­ics, health­care, tele­com and trans­porta­tion in­dus­tries. It also of­fers elec­tron­ics, soft­ware devel­op­ment and sys­tem de­sign ser­vices for au­to­mo­tive and aero­space in­dus­tries. It pro­vides an­i­ma­tion and vis­ual ef­fects ser­vices in the ar­eas of 3D stere­oscopy, an­i­ma­tion and gam­ing for tele­vi­sion ser­vice and com­mer­cials, cus­tom con­tent devel­op­ment, lo­gos and graph­ics and films. In ad­di­tion, it pro­vides in­dus­trial de­sign and in­no­va­tion ser­vices in the ar­eas of con­sumer in­sight, brand­ing, in­dus­trial de­sign, vis­ual de­sign and mer­chan­dis­ing, de­sign en­gi­neer­ing and man­u­fac­tur­ing sup­port. Fur­ther, it of­fers de­sign, brand­ing and me­chan­i­cal de­tail­ing for de­vices, sen­sors and gate­ways; de­vice, sen­sor, gate­way hard­ware, sys­tem and ap­pli­ca­tion devel­op­ment ser­vices;

com­mu­ni­ca­tions in­te­gra­tion and test­ing ser­vices; con­nec­tiv­ity, de­vice man­age­ment, big data, net­work man­age­ment, anal­y­sis and pre­dic­tion model; ap­pli­ca­tion ser­vices/work­flow; and user ex­pe­ri­ence (UX) and user in­ter­face (UI) de­sign ser­vices. Ad­di­tion­ally, it im­ple­ments and in­te­grates sys­tems and so­lu­tions for high-per­for­mance com­put­ing, com­puter aided de­sign, broad­cast, vir­tual re­al­ity, stor­age and dis­as­ter re­cov­ery; and of­fers pro­fes­sional ser­vices for the main­te­nance and sup­port of IT in­fra­struc­ture. It has a part­ner­ship with Ayla Net­works to help com­mu­ni­ca­tion ser­vice providers use IoT tech­nolo­gies.

We be­lieve that TEL is well placed to tap the ris­ing de­mand for its of­fer­ings. Since all the ar­eas where TEL op­er­ates are un­der­go­ing ma­jor tech­no­log­i­cal shift, TEL with its proven ca­pa­bil­i­ties and IP-based of­fer­ings is set to ben­e­fit. Gov­ern­ments world over are in­creas­ing fo­cus on re­duc­ing car­bon emis­sions and pas­sen­ger safety. To achieve this, high level in­tel­li­gence for Ad­vanced Driver As­sis­tance Sys­tems (ADAS) is re­quired, which pro­vides in­creas­ing sup­port for all as­pects re­lated to driver and ve­hi­cle be­hav­ior. This will even­tu­ally lead to fully au­ton­o­mous cars. Com­pa­nies need to up­grade and re­place their ex­ist­ing sys­tems to be able to cope up with tech­nol­ogy upgra­da­tion and chang­ing reg­u­la­tory norms. Such a shift is ex­pected to in­crease de­mand for elec­tron­ics within the car seg­ment and the need for con­nected cars. TEL ad­dresses this seg­ment through its so­lu­tions in­clud­ing Au­tono­mai, Au­tosar So­lu­tions, Au­tomaTE. TEL is al­ready work­ing with a top OEM (orig­i­nal equip­ment man­u­fac­turer) and a Tier 1 sup­plier on its Au­tono­mai plat­form. Sig­nif­i­cant ex­pan­sion in choice of con­tent and de­liv­ery mech­a­nism with the ad­vent of mul­ti­ple de­liv­ery and con­sump­tion op­tions like TV, mo­bile, etc. and emer­gence of OTT is ex­pected to drive TEL’s growth. TEL with its fo­cus on IP-based so­lu­tions and other of­fer­ings in the ar­eas of auto in­fo­tain­ment, au­ton­o­mous ve­hi­cle and with IPs like Fal­conEye is in the right di­rec­tion to achieve higher growth rates. This cou­pled with the man­age­ment’s fo­cus to achieve 10% se­quen­tial quar­terly rev­enue growth rate with PBT mar­gins of 24-25% will augur well for the com­pany.

Tech­ni­cal Out­look: The stock looks good on the daily chart for medium-term in­vest­ment. It has taken sup­port of an up­ward trend chan­nel pat­tern and co­in­cides with the trend line. The stock trades be­low im­por­tant mov­ing av­er­ages like the 200 DMA level on the weekly chart. Start ac­cu­mu­lat­ing at this level of Rs.1008.7 and on dips to Rs.945 for medium-to-long term in­vest­ment and a pos­si­ble price tar­get of Rs.1170+ in the next 6 months.

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