Tata elxsi

Stock Opportunities
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Attending Elxsi Concall for last 9 Qtrs, I feel , unless Top line Improves substantially, upside limited. Mr.Dave already ruled out further margin expansion , that means, it will be in band of 23-25 %

Need to see how it panned out now. Elxsi also does not follow any SI model,so that option is ruled out.

Some of the stated invesment eg Medical Electronics did not happen till date although it was stated they made an entry , in Q3,2015-16

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I think margins may shrink, rather than be stable. The overall environment for IT is still constrained.

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106

Pretty decent numbers, similar to last quarter. PAT up 42% YoY.

I thought this much was priced in already so don’t understand the market reaction.

Disc: Invested

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107

Global market demand for IT services and R&D outsourcing is picking up. With all verticals focusing on high growth trajectory… 10k cr is really undervalued if it has to become TCS in its chosen field.

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South Korea’s largest auto parts maker Hyundai Mobis said Sunday that it plans to make full use of 3-D mobile game software in the development of its autonomous driving system.
Mobis said that its research center in India has teamed up with Tata Elxsi – an artificial intelligence, Internet of Things and big data service provider based on the subcontinent – to develop the necessary 3-D images and software.

The contract calls for the simulation program to be developed by late 2019, Hyundai Mobis said.
http://m.yna.co.kr/mob2/en/contents_en.jsp?cid=AEN20180916001500320&site=0200000000&mobile

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109

What is the succession plan of Elxsi after Madhukar Dave ? His extension is expiring in 2019.

Will be interesting to watch…

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It is on a roll. The transformation and consistent built up in capability is bearing resultsTElxsi.pdf (533.1 KB)

Telxsi2.pdf (651.2 KB)

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And another one…

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One more…

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Hi

Quarterly results out. 17% increase YoY in operating revenue.

Rgds

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114

is increase in revenue purely due to currency depreciation? bcoz the market is still pounding the stock

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115

Does anybody have details of concall? I do not happen to see it on bse announcements… pls share urgently if it is today or tomo itself

Other income comp. has increased compared to previous qtrs that is why a little jump in EPS. even by knocking out the other income, the results looks good. Valuation froth seem to have gone out and looks like it is at saner valuations trailing basis… 21-22 PE TTM basis for high ROE, debt free, cash yielding company.

Disc. Invested.
Attached excel, numbers not exact due to rounding.elxsi.xlsx (14.8 KB)

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Elxsi has 2 threats…1. What if JLR reduces spend ? What will be the alternative to fall back on? 2. Merger with TCS…What about Madhukar Dave’s extension…he is retiring on 2018 Q4. …got 3 years extension…

1st one - you may get clarification in concall

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As per last input the current new business is 2x Jaguar business. Tata motors commitmentvto make Jaguar competetive and futuristic in terms of autonomous and electric is very clear so do not see any divergence in R&d side…there may be a cut in current production which already has gone through phase1. …Merger with TCS can really dilute the flavour and performance of elxsi…Regarding management change, neutral as tata is known to nurture leadership and moreover with Chandra in top seat technology will be core to the group startegy.The only worry seems to be a global slowdown.

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This is to inform that an Investors’ Conference call on Q2 FY 19 results of Tata Elxsi Limited will be held on Monday, October 15, 2018 at 3.00 PM (IST) during which the Leadership team will discuss the financial performance of the Company and take questions.

Q2FY19_ConCall_TataElxsi.pdf (431.0 KB)

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India is one of the top destinations for IT companies delivering both on shore and offshore services to global clients. An entire gamut of new technologies has emerged in the social, mobility, analytics and cloud (SMAC) space, offering a whopping US$1 trillion opportunity for Indian IT companies. Cloud represents the largest opportunity followed by social media as one of the most lucrative segments witnessing extremely strong growth. The engineering research and development sector continues to be the fastest growing segment, driven by demand from global original equipment manufacturers. India has a rich digital ecosystem of start-ups, technology and service providers. Leading names like Flipkart, SnapDeal, MakemyTrip, Ola etc., have expanded the Indian ecosystem and this has thrown the door wide open for employees of these companies to start their own enterprises. IT spending by security and banking companies is also one of the segments expected to grow by over 9% in the next few years. Tata Elxsi is one of the leading providers of design and technology services for engineering products and solutions across the world. The company provides technology consulting, new product designs and solutions for emerging technologies such as cloud, big data analytics, mobility, virtual reality and artificial intelligence

https://www.google.com/url?rct=j&sa=t&url=https://www.sundayguardianlive.com/business/tata-elxsi-may-appreciate-50&ct=ga&cd=CAEYACoUMTIzMTkyODE0OTQzMzIxMTUwOTQyHGI2NzdmZjQ1NDVjZjJjZWM6Y28uaW46ZW46SU4&usg=AFQjCNEqI0_eo018P-yV7xh0FZ9lQUXi5Q

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q2 results
change of
from positive 76 lacs to negative 1.83 cr

iteams that will not be reclassified to profit or loss
any idea what that is ??

image
image845×398 96.8 KB

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Hi

Some of the notes I jotted down in today’s call. I couldnt attend the last 15-20mins. Please add/modify. Thanks.

Larger deals with longer engagement durations, brought in such few last qtrs.
Trying to grow automotive business apart from key accounts.
Medical business is continuing to show encouraging growth.
In broadcast - Winning deals and key customer engagements.

Other income – the component of Fx gain is 14.7 Crs, 9% over preceding qtr and 20% over YoY, in constant currency 3% over last qtr and 10% over YoY.

Design - won no of awards in last qtr for earlier work.

Considerable uncertainty around JLR, not seen significant growth in their engagement yet. Trying to grow business in this segment outside this account and have made progress there in last qtr. A few qtrs. ago 24% business from JLR to 22% last qtr. They are not the largest outsourcing partner for JLR.

Hyundai engagement for autonomous cars more for strategic engagement than for revenue.

Panasonic deal has primary objective to deal with our market and extend technologies to other markets. No change in objectives.

Objective to grow revenue by 10% every quarter sequentially. Categorically saying that this is not a projection. New engagements will be the growth drivers.

24-25% is the objective to maintain margins. Preceding quarters it was higher. (PBT/Sales = margin, including fx gains/loss).

Fx in Q1FY19 was negligible in lakhs.

One autonomous vehicle testing in Europe.

Less than 6k employees in this qtr. Onsite revenues is 40%. 35% of workforce is onsite.

Expect slowdown in ICE engines but have factored in this development.

Interesting implications in renting/leasing cars vs owning cars. Requires tech implementation for pay for use. Not that it will happen immediately but will be a reality in 5 yrs time.

Lot of intricacies involved in making a good quality electric car and refers to complexities involved in making a Tesla eg mechanical structure, drive motor strategy, efficiency, tradeoff between acceleration and battery times etc and in each of these challenges there is an opportunity for Tata Elxsi.

Infotainment will evolve be it android or BlackBerry platform. New opportunities is mostly in electrification of cars on a number of parameters like battery, safety, acceleration etc.

Rgds

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124

Q2FY19 Conference call (Half yearly results)

On the call: Mr. Madhukar Dev (Mr. Manoj Raghavan and Mr. Nitin Pai not on the call).

Mr. Madhukar Dev’s address:

  • Looking at larger deals with longer engagement durations. Looking at engagements that can cross 4 quarters boundary rather than look for new engagements all the time), brought in quite a few such engagements in the qtr. Though, multi-year contracts insignificant compared to short term contracts at the moment.
  • Trying to grow automotive business apart from the key account (JLR) they have. Good uptake in the automotive business besides the key account (JLR)
  • Medical business is continuing to show encouraging growth.
  • In broadcast – Apart from winning deals they’ve been able to get into a new mode of engagement with a key customer wherein they will share the success of the product that they are helping the customer launch (referring to Airtel D2H here).
  • Financials:
    • Already released and available.
    • Other income: Foreign exchange component is Rs.14.7 crs. 9% over preceding qtr and 20% over YoY, in constant currency 3% over last qtr and 10% over YoY.
  • Marketing: They’ve participated in quite a few events. The best one was the broadcast show in Amsterdam. Demonstrated their capability in Android and OTT space which is the fast-growing segment in the broadcast market.
  • Design business: Won a number of awards won in the last quarter for work carried out in the earlier quarters. The renovated Bombay House was a project carried out by Tata Elxsi and it has been appreciated all round.

Questions answered:

  • Slowdown in JLR and uncertainty around Brexit. How will it affect the company?

    • There is definitely uncertainty around JLR. Not seeing significant growth in JLR account. Over time as things settle down, Elxsi’s share in JLR account will go up. In the interim, company is taking steps to grow the transportation side of the business outside of this account. Considerable progress has been made in the last few quarters, esp. in this quarter. Confident JLR will bounce back and grow, however the company has been able to grow the non-JLR accounts quite significantly. JLR’s % share in the revenue was 24% (few qtrs ago). Now it is 21-22%.

      • Some thoughts: Comments from conference call in Q4F18 below. If one is to read the comments from Q4FY18, are the markets getting nervy about Elxsi’s prospects for no reason (suggesting as the stock has been pounded down recently)?
        • JLR – 22% of Elxsi’s revenues (down from 25% a couple of years ago). This is driven by JLR’s design and engineering budgets. These budgets are usually set for a 3-4 year periods. So, if JLR doesn’t sell more cars, it doesn’t impact Elxsi. In fact, it works more in their favour as the need for JLR to upgrade the technology increases more. Top 5 customers contribute 44% of revenues. 57% revenues from top 10 clients.

    • No idea what will happen due to Brexit. Business will adapt and do what is necessary to continue and grow.

  • Hyundai collaboration. Revenue expectation in FY19 and FY20?

    • Building the tool for future licensing by either Elxsi or Hyundai (not the car company but a Tier-1 supplier)
    • More a strategic tie-up for the time being
    • It is for accelerating work on developing autonomous cars

  • Panasonic deal

    • Deal of global nature for Panasonic products
    • Primary goal to look at the requirements for this market. Use the intelligence / learnings etc. worldwide.

  • IP revenue for this quarter

    • Small % still. Bulk of it comes from the broadcast business. No significant change.
    • Not up to 10% of revenue yet. That is what the company’s goal is.
      • Some thoughts: Comments from conference call in Q4F18.
        • IP based revenues 5% of overall revenues in FY18. 2.5% in FY17 (grown by 100%). Mgmt indicates they aim for this to be 10% of FY19 earnings. Overall, the services revenue will still be significant driver of revenues over the next few years when compared to IP based businesses.

  • What are growth drivers?

  • Margins:

    • Looking to maintain margins at 24-25%. This is what they factor in while planning. Current levels won’t be their norm. PBT / Sales margins being spoken about.

  • JLR slowdown, does it take away the aspiration of growing 20% for the next few years?

    • Not really. In fact, they are not seeing a significant slowdown in the work coming out of JLR. Change taking place in the mix of work. They may end up doing more work off shore than on site. No issue in terms of volume. Thoughts also corroborated by statements made in Q4FY18

  • Autonomous vehicle

    • Not looking at creating the whole product / IP for autonomous cars. Only looking at certain components / elements that will help car makers accelerate their growth in creating such cars. Their aim is basically to license such a product / such components or get service contracts out of such companies.

  • Total employees: Little less than 6,000. Utilization rate: 78-79%. More employees to be added next year for the work that will come in the future. Building bench strength for future growth as the markets they are looking at are looking promising and the company feels it is the right time to expand.

  • European auto sector slowdown? Electric cars potential? Industrial design business – its future growth?

    • New engagements coming in and thus they will be back on their old growth track for ID business
    • Slowdown already factored in by the company. Interesting implications in renting/leasing cars vs owning cars. Requires tech implementation for pay for use. Not that it will happen immediately but will be a reality in 5 yrs time.
    • Lot of intricacies involved in making a good quality electric car and refers to complexities involved in making a Tesla eg mechanical structure, drive motor strategy, efficiency, tradeoff between acceleration and battery times etc and in each of these challenges there is an opportunity for Tata Elxsi.

  • Growth of 20% being looked at in rupee terms. Offshore revenues 60% - onsite 40%. 25% of employees onsite. JLR work predominantly in electronics engineering. R&D spends is quite large. Most of it done internally. Some of it outsourced. Not the largest outsourcing partner for JLR and it gives Elxsi significant head room to expand.

  • Infotainment is still a big play for the company. Working on other areas of the car. The real opportunity going forward though is in the electrification of the car.

  • Broadcasting the opportunity is with internet TV. Interfaces can still be improved upon. Seeing a lot of movement towards OTT, almost every broadcaster will have to move to this over time and thus it is a big opportunity. Both Set Top Box (for TV experience) and OTT (for handsets) business growing and converging.

  • Growth drivers: Automotive is 60% of their revenues. See potential for growth in smart homes – broadcast and IOT. They will remain the primary drivers of growth going forward. Medical segment will also become a significant driver of growth in the next few years (will be spoken off in the same breath as automotive and broadcast).

  • Client wins this qtr: 12 new customers added in the last quarter (including auto + broadcast). In medical the traction is mostly with equipment makers. In the future, it may even move to healthcare providers.

  • Use of cash: Being looked at for organic and inorganic growth. Company looking at some opportunities for inorganic growth. No success yet in inorganic growth opportunities due to valuations and / or other reasons (proper fit etc.). If they do go ahead with acquiring another company – cash on books good enough to only fund something of strategic nature. For anything of scale, they will need more cash than available on the books.

Disc: Invested.

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Orient fights to keep the brand relevant

The CK Birla group company goes premium, targets millennial buyers as it partners with Tata Elxsi to enhance product design and performance.

http://www.tataelxsi.com/whats-new/News/orientelectricfans.html

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