Tata Elxsi‘s stock fell 4% after Kotak Institutional Equities retained a bearish call on the company.

What The Brokerage Said: Kotak retained a "sell" call on Tata Elxsi with a target price of ₹5,500, indicating a 38.69% downside from previous day's closing price. 

Tata Elxsi's stock price gained 26% in the last two days, but the stock was expensive even before the rally, the brokerage said. Kotak believes the company's revenue growth would improve through rest of FY25 as large original equipment manufacturers’ engagements ramp up. 

See Also: NBCC Shares Soar 8% After Setting Up Board Meeting To Consider Bonus Issue

This includes aggressive research and development spending from Jaguar Land Rover, which accounts for 18.1% of company's overall revenue. However, it faces headwinds in revenue segment as 34% of its revenue is from affected tier 1 suppliers, which would remain under pressure and partially offset revenue growth, Kotak added.

The brokerage sees weakness for the company in areas such as spending in media and communications vertical, middling presence in the healthcare segment and deferment of large clients. 

The company's valuations are stretched at 61 times one year forward price to earnings while the brokerage has baked in over 20% constant currency revenue annual growth over FY2024-34. 

Price Action: Shares of Tata Elxsi fell 4.96% to an intraday low of ₹8,526. 

Read Next: Bernstein Picks DMart, Trent, Devyani As Top Picks Among Retail And Restaurants, Sees Value Beyond India’s Wealthiest 10%