TATAELXSI - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 19 Sept 25, 2:16 pm

Fundamental Rating: 4.0

📊 Core Financials Overview

Profitability

ROE: 29.3% and ROCE: 36.3% are excellent, showcasing strong capital efficiency.

EPS of ₹120 and PAT of ₹144 Cr (down from ₹172 Cr) reflect solid earnings, though the −21.6% QoQ drop suggests margin pressure or project delays.

Operating margins remain robust, supported by high-value digital engineering services.

Balance Sheet Strength

Debt-to-equity ratio: 0.07 — extremely low, indicating prudent financial management.

Book Value of ₹459 vs Current Price ₹5,734 → P/B ratio ~12.5, which is elevated but typical for high-growth tech firms.

Dividend Yield of 1.31% adds modest income appeal.

Cash Flow & Stability

PEG ratio of 3.78 suggests overvaluation relative to earnings growth.

RSI at 53.9 and MACD negative indicate neutral momentum, with potential for consolidation.

📉 Valuation Metrics

Metric Value Insight

P/E Ratio 47.9 Overvalued vs industry PE of 30.0

P/B Ratio ~12.5 Premium pricing

PEG Ratio 3.78 Indicates stretched valuation

Intrinsic Value ~₹5,000–₹5,200 Slightly below current price

Tata Elxsi appears moderately overvalued, though its fundamentals justify a premium.

🧠 Business Model & Competitive Edge

Sector: Tata Elxsi operates in the ER&D (Engineering, Research & Development) space, offering design-led technology services across automotive, media, healthcare, and communications.

Strengths

97%+ revenue from Software Development & Services (SDS), with high-margin verticals

Strong presence in embedded systems, AI, IoT, and cloud-based platforms

Revenue mix: Transportation (56%), Media & Communications (31%), Healthcare (12%)

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Challenges

Recent profit decline and high PEG ratio

FII holding flat, though DII interest rose (+1.25%)

Tata Elxsi’s niche positioning in digital engineering and design services gives it a durable moat, especially in automotive and healthcare innovation.

📌 Entry Zone Recommendation

Suggested Entry Range: ₹5,000–₹5,200

Below 50 DMA (₹5,772) and closer to intrinsic value

RSI suggests waiting for a mild pullback before entry

🧭 Long-Term Holding Guidance

Hold if Already Invested: Strong fundamentals and sector tailwinds support long-term compounding.

Accumulate on Dips: Especially near ₹5,100 for better margin of safety.

Watchlist Triggers

EPS recovery and margin expansion

Strategic wins in autonomous systems and healthcare platforms

Institutional accumulation and volume breakout

Tata Elxsi is a high-quality tech play with deep domain expertise and global relevance. For deeper insights, check out TopStockResearch’s fundamental dashboard or Invest Yadnya’s business analysis

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