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