Despite the announcement of a Rs 70/share dividend, Tata Elxsi falls more than 3%. Identify the cause of the sale
In spite of declaring a dividend of Rs. 70 for each equity share, the share price of Tata Elxsi fell by more than 3%. The decline follows the company’s Q4 results, which showed a 4.6% decline in net profit when compared sequentially to the prior quarter.
Tata Elxsi has undergone adjustment since then. The company has witnessed tremendous development over the years, more than tripling in value from Rs 200 per share in 2014 to over Rs 10,000 in August 2022. From its peak in December 2023, the stock has dropped by more than 20%.
The general perception of IT businesses is still negative, which is reinforced by the belief that short-term profit growth would be modest. Although growth opportunities are expected until FY25.
It is anticipated that the intensity would be lower than anticipated. The muted mood is also influenced by certain firms’ transitory margin constriction and a sluggish expectation for sales growth.
In Q4 of FY24, Tata Elxsi
Tata Elxsi’s net profit dropped 4.6% from Rs 206.4 crore in Q3FY24 to Rs 197 crore in Q4FY24. There was a 2.3% decline in net profit on an annual basis. Despite a 1% decline to Rs 906 crore from Rs 914.2 crore in the December quarter, the operating revenue for the quarter increased by 8.1% when compared to the same time the previous year.
The company’s operating Ebitda decreased by 4.5% from Rs 244.7 crore in the December quarter to Rs 233.7 crore in the March quarter.
Tata Elxsi analyst
“Tata Elxsi reported a soft quarter (Q4FY24) with a delayed program ramp-up in the transportation vertical and a ramp-down in a media and communication customer. According to Atul Parakh, CEO of Bigul, “TELX’s growth has normalized, impacted by market-share loss in the transportation vertical (which accounts for 50% of its revenue) on account of a higher mix of Tier-1s vs OEMs, increased captive intensity, business mix challenges in the Healthcare vertical, and macro factors impacting media and telco enterprise client spend.”
profits
In order to close bigger agreements, Parakh said, the firm is concentrating on combining the sales and front end of its former embedded product design (EPD) and industrial design and visualisation (IDV) businesses. Brokers continue to maintain a Tata Elxsi underweight call.
Equity InCredibles on Tata Elxsi
In 4QFY24F, Tata Elxsi had a 0.6% quarter-over-quarter reduction in sales, according to a study from InCread Equities. Nonetheless, there was a noticeable 7.2% rise in constant currency on an annual basis.
The primary cause of this reduction was a single media client’s decreased business within the Media & Communication sector, which had a 4% quarter-over-quarter decline in constant currency.
The study also said that delays in transaction ramp-up were impeding the development in the Transportation vertical, which led to a meager 1.2% quarter-over-quarter gain in constant currency. A quarter-over-quarter drop of 97 basis points to 25.8% in the company’s EBIT margin was mainly caused by expenditures in capabilities and a fall in revenue.
