Tata elxsi

Tata elxsi.pdf (485.7 KB)

Tata Elxsi has unveiled TEngage, a digital health platform designed for
omnichannel care at the HIMSS 2022 Global Health Conference & Exhibition in
Orlando, Florida.

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Intriguing for me…they mention that medical is NOT a cyclical field, automobile industry IS and yet they have allocated more to the automobile than the medical sector of their business in terms of revenue generation etc. Can anyone explain that stance?

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Hi

TEL is part of Tata Group. Tata Motors is also part of Tata Group so is JLR.

Cars category is under tremendous pressure to introduce new models both in ICE and EV therefore heavy expenditure on developing new products.

JLR is one of the largest customers of TEL

Auto is currently their forte. That’s one reason. Secondly, medical would be a completely new vertical for now. It will take time for them to develop their expertise in terms of product placement.

Very soon, we should see them heading into that direction where medical would be more than auto.

Stating the obvious right now, would attract tremendous competition. Hence, no management would say it explicitly.

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Farming, mining and agriculture.
There is a lot of technology going into the above sectors which is not tapped in.
US has a lot of farm equipments which are tech enabled to atleast 90%. Smart cities are also a market for Elxsi.

Highlights of the Quarter Ended March 31, 2022

• Revenues from operations at Rs. 681.7 Cr, + 7.3% QoQ, + 31.5% YoY
• EBITDA Margin at 32.5%; PBT Margin at 31.5%
• Profit after tax at Rs. 160 Cr, growing 38.9% YoY

The Board of Directors have recommended a final dividend of Rs. 42.50 per equity share.

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Brilliant set of number by Tata elxs accross vertical ,worrying sign is attrition rate which have jumped from 7% to 21% in 4 quarters!! its worrying ,as it MAY hit them in 2/3 years ,they are one of the lowest paid ,special incentive last year also looks like didn’t help the cause!
Now tata elxsi operating margin would be the best in the industry ,better than TCS also (27% ) at 30% + for many quarters now (32/33% now )

Disc.-Invested and one of my Top holdings ,hence views may be biased !!

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For the quarter, revenue growth of 7.29% is pretty good. Margins have also held strong, at 49 % Gross. Operating margins at 32 % are good too, though a percent lower than previous quarter. This should have been expected as costs are coming back. Operating profit growth is therefore slower at 4 % Q-o-Q. PBT growth of 10 % Q-o-Q and PAT growth of 6 % Q-o-Q is lower than the previous quarters but nothing to complain about.

Net employee addition at 343 for the quarter is low, as attrition continues to pinch. The trend of increasing fixed price contracts continues and is now above 52 %. Higher offshoring also continues, this is a good thing. All three verticals have posted strong growth.

For the year of course, the numbers are very strong and broken previous records. Interestingly, employee costs as a percentage of revenues are down, lower than previous two years. Receivables have got stretched however, and hence cash flow is not as good. Dividend is a tad lower if one counts the special dividend of Rs.24 last year. They could have easily declared Rs.48 per share, I don’t understand the logic of saving a paltry Rs.34 crore outflow here.

On the whole, I would say numbers are consistent with earlier quarters. Slight headwinds on costs and hiring, but revenue – which is the most important number of all - continues to grow unabated.

Not sure what the market is expecting though.

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Mkt will be looking forward to the future commentary, this result is already baked in. For me, also the same. Is this revenue growth sustainable ? Unfortunately, they don’t give guidance . Will be waiting for concall comments to invest further.

Guidance is something which should be taken with a pinch of salt with companies here as many might be looking to get new investors and they are more or less pitching high milestones for themselves.
TATA being a name which has been in focus this year due to synergy with other tata names. Elxsi also benefits a lot due to JLR and tata brand name. CEOs and CTOs have been an easy hire for Tata brand. Tata neu is an example reg this.

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Check this out for outlook from the CEO. Suffice to say they are in a solid place for short term at minimum.

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Good wrt SEZ being a tax benefiting office space
Also, SEZ attracts many candidates as they are eligible to take many tax benefits over here. Good margin accretive step

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