TATAELXSI - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.7
| Stock Code | TATAELXSI | Market Cap | 34,385 Cr. | Current Price | 5,519 ₹ | High / Low | 6,735 ₹ |
| Stock P/E | 54.5 | Book Value | 434 ₹ | Dividend Yield | 1.36 % | ROCE | 36.3 % |
| ROE | 29.3 % | Face Value | 10.0 ₹ | DMA 50 | 5,398 ₹ | DMA 200 | 5,658 ₹ |
| Chg in FII Hold | -3.97 % | Chg in DII Hold | 1.91 % | PAT Qtr | 159 Cr. | PAT Prev Qtr | 155 Cr. |
| RSI | 54.6 | MACD | 19.8 | Volume | 3,72,664 | Avg Vol 1Wk | 2,54,476 |
| Low price | 4,601 ₹ | High price | 6,735 ₹ | PEG Ratio | 4.30 | Debt to equity | 0.06 |
| 52w Index | 43.0 % | Qtr Profit Var | -20.0 % | EPS | 93.2 ₹ | Industry PE | 24.8 |
📊 Analysis: TATAELXSI demonstrates strong fundamentals with ROE at 29.3% and ROCE at 36.3%, indicating excellent capital efficiency. EPS of 93.2 ₹ supports profitability. However, the stock trades at a high P/E of 54.5 compared to the industry average of 24.8, suggesting overvaluation. The PEG ratio of 4.30 highlights growth priced at a premium. Dividend yield of 1.36% provides modest passive returns. Technicals show neutral-to-positive momentum with RSI at 54.6 and MACD positive. The ideal entry zone lies between 4,800–5,200 ₹ for margin of safety. For existing holders, a medium-to-long horizon is viable, with partial profit booking near 6,600–6,700 ₹ resistance unless earnings growth accelerates.
✅ Positive
- Strong ROE (29.3%) and ROCE (36.3%) support long-term compounding.
- EPS of 93.2 ₹ reflects robust profitability.
- Dividend yield of 1.36% provides steady income.
- DII holdings increased by 1.91%, showing domestic investor confidence.
- Low debt-to-equity ratio (0.06) ensures financial stability.
⚠️ Limitation
- High P/E (54.5) compared to industry average (24.8).
- PEG ratio of 4.30 highlights expensive growth valuation.
- Quarterly profit variation (-20.0%) indicates earnings pressure.
- FII holdings decreased by -3.97%, showing reduced foreign confidence.
📉 Company Negative News
- Sequential decline in quarterly PAT (159 Cr. vs 155 Cr.).
- Stock trading at only 43% of 52-week index range, reflecting limited momentum.
📈 Company Positive News
- Strong fundamentals with double-digit ROE and ROCE.
- Domestic institutional investors increasing stake.
- Positive MACD indicates short-term bullish momentum.
🏭 Industry
- IT and design services sector benefits from digital transformation, automotive software, and product innovation.
- Industry P/E at 24.8 suggests TATAELXSI trades at a steep premium.
- Structural drivers: embedded systems, AI adoption, and global outsourcing demand.
🔎 Conclusion
TATAELXSI earns a rating of 3.7 due to strong ROE/ROCE and profitability but faces valuation risks and earnings pressure. Long-term investors should consider entry in the 4,800–5,200 ₹ zone for margin of safety. Current holders may adopt a medium-to-long horizon, with partial profit booking near 6,600–6,700 ₹ resistance unless profitability improves. The stock remains a strong niche IT play but requires caution due to premium valuations.