A good run for Tata Elxsi

The stock of Tata Elxsi has been on a tear, rising by over 13 per cent over the last one month. After the company announced its FY-18 fourth quarter results in April, there has been renewed positivity around the stock. In the March quarter, Tata Elxsi’s revenues grew by 14.8 per cent over the same period in FY-17, while net profits rose by 61.6 per cent.

The company ended FY-18 with a 12 per cent growth in revenues, which was among the best in the industry. Its embedded product design segment (83.7 per cent of revenues) continued to witness robust traction. With the general re-rating in mid-tier IT stocks over the last one year, Tata Elxsi too has had a great run.

 

The company operates in a niche space in terms of its offerings compared to regular software services players, and has generally enjoyed superior valuations. Even so, at nearly 34 times its trailing 12-twelve months earnings, Tata Elxsi’s PE multiple appears expensive.

 

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