After a great run in 2023, shares of Tata Elxsi have remained under pressure since the start of 2024. On a year-to-date basis, the stock has gone down around 12%. But analysts at Kotak Securities think the worst is yet to come.

The Tata Elxsi Analyst: Analysts at Kotak Securities maintained its “sell” rating for the stock cutting the price target to ₹5,400 from ₹5,650. The revised target indicates an around 30% slide from the stock’s last closing price of ₹7,665.

The Tata Elxsi Thesis: The domestic brokerage firm said that the revenue growth prospects of the company are expected to be affected by several factors, including a constrained addressable market and business churn at Tier-1 suppliers. The outlook for CY24 provided by Tier-1 suppliers does not suggest any improvement, further adding to the challenges faced by the company.

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Despite strong spending by original equipment manufacturers (OEMs), the higher exposure to Tier-1 suppliers continues to impact the company’s performance adversely. Additionally, the persistently weak demand is expected to lead to subdued performance in FY25E.

In the transportation and media & communications segment, the outlook is anticipated to remain weak throughout 2024, contributing to the overall subdued performance, the brokerage firm added.

As a result of these factors, Kotak Securities revised the revenue and earnings per share (EPS) estimates for FY25-26E by 7-8%. This slowdown is observed across key verticals, reflecting the broader challenges in the market environment.

Price Action: Tata Elxsi’s share price was down 0.69% to trade at ₹7,612.30 on Tuesday morning.

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