This Tata Stock Is Slumping 4% After Q3 — Analysts Think The Worst Is Yet To Come

Tata Elxsi‘s share price slumped for the eighth straight session on Wednesday as the markets were unimpressed by the company’s December quarter results.

What Happened: The Tata Group company reported a 6% increase in net profits at ₹206.4 crore compared to ₹194.6 crore in the year-ago period. The revenue from operations saw an 11% increase, reaching ₹914.2 crore from ₹817.7 crore in the same period last year.

The company’s transportation segment, which constitutes approximately 47% of its revenue, experienced a growth of 15.6% year-on-year. This growth was attributed to deal wins and continued traction in Software Defined Vehicles (SDV) engagements. The company’s operating margin declined by 40 basis points to 29.5%.

Tata Elxsi also reported adding 350 employees in the quarter, bringing the total to 13,221. The attrition rate fell by 80 basis points to 12.9% in the quarter ending December.

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“As we step into the last quarter of this financial year, the confidence of our customers in our differentiated Design Digital proposition and delivery excellence, and a strong deal pipeline provide us the foundation for sustained growth,” said Manoj Raghavan, CEO, Tata Elxsi.

Analyst Reactions: JP Morgan maintained its “underweight” rating for the stock slashing the target price to ₹6,000 from ₹6,200. The brokerage said that while the company’s December quarter revenue was in line with expectations, it failed to meet estimates on margins. The analysts also added that it seems that margins may have peaked for the design and technology services provider.

Morgan Stanley also maintained its “underweight” rating for the stock cutting the target price to ₹7,300 from ₹7,500. The analysts said that the Q3 numbers missed estimates and the deal ramp-ups in the transportation business were not as anticipated.

Kotak Securities also maintained its “sell” rating for the stock raising the target price to ₹5,650 from ₹5,450. The domestic brokerage said that the company’s revenue and margin both missed its expectations. The brokerage added that it sees some headwinds on the horizon for the transportation segment.

Price Action: Tata Elxsi’s share price was down 4.11% to trade at ₹7,859.20 as the markets opened on Wednesday.

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