1 Tata Stock To Rise By Rs 1,400 Per Share In Near Term; Geojit Sets Big Target Price, Here's Why

Tata Group-backed midcap IT stock is an attractive bet for fetching hefty growth. There is a potential upside of nearly Rs 1,400 or 18% in the near term. This would be Tata Elxsi's share price which is currently trading at Rs 7,650 levels.

In its latest research note, Geojit said that Tata Elxsi well positioned to capture the opportunities due to its deep domain knowledge and work on its clients' long-term strategic projects. The brokerage believes that the growth in the transportation vertical will persist in the coming years, given the need for transformation in the automobile industry.

It added, "We expect strong deal wins and a focus on specialized IDV, and a positive outlook on the EPD division is likely to support valuation. We expect that the industry is likely to witness pick-up by second half of the year on account of increase in US IT spending. We rollover and value at 45x FY26E EPS, factoring in strong earnings CAGR growth over FY24E-26E."

Geojit further highlighted long-term revenue visibility in Tata Elxsi ahead. They are:

- Despite the slowdown, TELX reported revenue growth of 12% YoY and 3.7% QoQ in Q3FY24. The growth was driven by large deals in the healthcare & life science division, which grew by 4.6% QoQ.

- The Transportation segment witnessed steady growth of 1.9% QoQ. While there has been some delay in deal closure due to holidays.

- Operating margin came marginally below estimate at 29.6%(-62bps) due to wage hikes, sales promotions, and training, while a reduction in outsourcing contracts and a lower attrition rate to support margin.

- Tata Elxsi's business outlook continues to be solid, based on the top 10 customers for engineering services. Despite weak macro headwinds, overall hiring improved by 2.7% QoQ, with a net headcount of 13,221.

Geojit has set a target price of Rs 8,989 apiece, implying a potential of nearly 17.5% from the current market price.

On BSE, Tata Elxsi's share price was marginally up to end at Rs 7,650.45 apiece with a market cap of Rs 47,644.28 crore.

During Q3FY24, Tata Elxsi registered a net profit of Rs 206.4 crore in Q3FY24, registering a growth of 3.2% QoQ and 6% YoY. While revenue from operations stood at Rs 914.2 crore, up by 3.7% QoQ and 11.8% YoY.

On February 2nd, Tata Elxsi introduced an innovative packaging design for the Vatika Shampoo range in the UAE market. Vatika, the leading natural hair care brand recently underwent a brand refresh for its full range of haircare products. Tata Elxsi played a pivotal role in crafting a fresh design language system, which visually represented Vatika's commitment to sustainability and was connoted as a natural haircare brand.

It said the resulting achievement goes beyond environmental sustainability, serving as a testament to the innovative integration of engineering and simulation in design. This effort was geared towards reducing
plastic usage without compromising the bottle's functionality, usability and structural integrity.

Also, Tata Elxsi has been awarded PlaƟnum Winner for the 'Best Network OrchestraƟon SoluƟon in TELCO' at the Future Digital Award by Juniper Research for its ground-breaking network automaƟon product - NEURON. The award recognizes the very best products and plaƞorms in the world for the telecom sector.

Tata Elxsi is among the world's leading design and technology services providers across industries, including Automotive, Broadcast, Communications, Healthcare and Transportation.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or 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.