In the latest quarter, Tata Elxsi’s revenue grew a little faster than expected, driven mainly by a strong rebound in its Transport business.
Revenue beats expectations
The company posted a 3.2% increase in quarter‑on‑quarter revenue (constant‑currency), ahead of the 2.5% estimate. The boost came largely from the Transport vertical, which climbed 7.3%.
What drove Transport growth?
- Ramp‑up of a major anchor account.
- Spending recovery from key strategic customers.
However, revenue from the top‑10 accounts (excluding the anchor) fell 7.5% in U.S. dollars, as original equipment manufacturers (OEMs) focused more on cost‑cutting than on new innovation.
Mixed results in other segments
Media & Communications (M&C) and Healthcare & Life Sciences (H&L) posted their third straight quarter of decline. The analysts note that spending in these areas is uneven because of deeper structural issues, and it may take a few more quarters for the pattern to stabilise.
Management remains optimistic, pointing to new client wins and some project closures in Q3 that could revive growth in these verticals.
Margin improvement and utilisation
Operating margin beat the forecast by 140 basis points. Current capacity utilisation is about 75%, and the company aims to reach 85% by adding more automation and AI tools.
Separating revenue growth from hiring is also expected to lift margins further. Because of the Q3 beat, margin forecasts have been nudged up by 70 bps for FY26, 40 bps for FY27, and 20 bps for FY28.
Future outlook and target price
- FY26 revenue is projected to fall 4.8% (previously –5.1%).
- FY27 revenue is expected to grow 9.8% YoY.
- FY28 revenue is expected to grow 11.6% YoY.
Analysts apply a 33× price‑earnings multiple to FY28 earnings, giving a target price of ₹5,500. With valuations already high, they recommend a “Hold” stance.
Disclaimer
Remember, this is just one perspective, not a prediction. Do your own research or consult a certified advisor before making any investment decisions.