1:1 Bonus, 700% Dividend 66,201% Gains: Crorepati Tata IT Stock Turns Rs 1 Lakh To Rs 6.6 Crore; Time To BUY?

Tata Group-backed tech giant, Tata Elxsi has witnessed a mostly bearish tone in 2024 so far, and after its Q4 results experts have held mixed opinions on the stock. At the latest, KR Choksey has recommended Accumulate Tata Elxsi shares owing to its expansion plans for FY25 and strategic investments in AI and GenAI solutions for revenue growth. Although Tata Elxsi is currently facing challenges, KR believes a turnaround is likely only after a few quarters.

But did you know, that Tata Elxsi shares have made investors rich, and in the long run, some have even reaped benefits in crores?

Tata Elxsi Share Price:

On BSE, Tata Elxsi's share price is at Rs 7,047.75 apiece, down by 0.8% on April 30. In April month alone, Tata Elxsi's share fell by nearly 9%. While YTD, the stock is down by 19.4% on BSE.

Notably, its year-on-year, performance is in green with over 6% gains. But in the long-term, Tata Elxsi has given fruitful returns. In 5-years, the stock emerges as a multibagger by soaring 707% on the BSE. Notably, its all-time gains are a massive 66,200.56% so far. The stock price was at a meagre Rs 10.63 on April 5, 1996.

Those investors who bought Tata Elxsi shares on April 5, 1996, let's say for Rs 1,00,000, their corpus is now worth over Rs 6.6 crore or Rs 6,63,00,560 as of April 30, 2024.

KR Choksey On Tata Elxsi:

In its research note, KR Choksey said, "In our view, Tata Elxsi is currently facing challenges in driving top-line growth and retaining business from customers. The recent Q4FY24 results missed our estimates across the board, and we believe that any turnaround will occur only gradually after the next few quarters."

KR's note added, "Accordingly, we lower our top-line and profitability estimates for FY25E and FY26E. The stock currently trades at 41.0x and we retain our P/E multiple at 44.0x on our FY26E EPS, to arrive at a reduced target price of INR 7,536 (previously: INR 8,390). However, we maintain our "ACCUMULATE" rating on Tata Elxsi as we expect the current challenges to be only transient."

According to the brokerage, while FY25E guidance is not provided, the Company anticipates repeating the strong performance in automotive, aims for MCV business contribution to growth, and expects acceleration in healthcare following the resolution of previous issues. Additionally, the Company's presence in growth segments, focus on software and electronics, winning strategic deals, and operational capabilities in India align well with industry trends and potential acquisitions.

Also, it added, that despite recent challenges in the media communication and transportation sectors, the Company anticipates growth improvement starting from Q1FY25, with momentum expected to carry forward throughout theFY25E.

Tata Elxsi's involvement in the semiconductor industry remains focused on software development and application solutions for specific industry verticals, rather than chip design, despite India's and Tata Group's investments in the semiconductor sector, it said.

Moreover, significant investments are being made by Tata Elxsi in AI and GenAI solutions, proof of concepts (POCs), and talent acquisition across the company, to have25%of engineers AI-ready by Q3FY25E.

Tata Elxi Dividend:

The tech player has recommended a highest dividend of 700% at Rs. 70/-, per equity share of Rs. 10 each, for the financial year 2023-24, subject to tax, which shall be paid/dispatched on or after the seventh day from the conclusion of the 35th Annual General Meeting, subject to the approval of the shareholders of the Company.

Before the upcoming Rs 70 per share dividend, Tata Elxsi's highest payout was Rs 60.60 per share in 2023.

Since June 2001, Tata Elxsi has delivered up to 24 dividends, as per Trendlyne data. The highest dividend payout was Rs 60.60 dividends per share in 2023. However, since its bonus issue in 2017, the company has delivered as much as Rs 208.1 dividend per share in 7 years cumulatively.

Tata Elxsi has paid only one bonus share till now. It was in September 2017 when Tata Elxsi turned ex-bonus on the 18th of that month for a bonus issue in the ratio of 1:1. It meant Tata Elxsi paid 1 bonus share on every existing 1 share.

Tata Elxsi Q4 Results:

During the last quarter of FY24, Tata Elxsi announced its PBT was at Rs 262.4 crore, up 4.9% YoY, while revenues were at Rs 905.9 crore up by 0.9% QoQ and 8.1% YoY. EBITDA margin was at 28.8%.

Overall, in FY24, Tata Elxsi's revenue was at Rs 3,552.1 crore, registering double-digit 13% YoYg growth, while in constant currency the company recorded 9.3% YoY growth in software development and services and 18.6% YoY growth in system integration and support segment. PBT was up 11.9% to Rs 1,048 crore, surpassing the Rs 1,000 crore mark for the first time. EBITDA margins stood at 29.5%.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.