Tata Elxsi (TELX IN) – Q2FY26 Result Update – Improved performance lay foundation for better H2… – Upgrade to ‘Reduce’
Published on 10 Oct 2025
The revenue growth exceeded our estimates with 1% QoQ CC growth & margin improvement of 30bps. Surprisingly, the overall revenue impact on the cyber incident for its top account turns out to be less severe (50-100bps QoQ) than anticipated. Additionally, the ramp up of two large deals within Automotive space compensated the drag within its top account. The underlying demand for Automotive OEMs is recovering, the projects that were kept on hold are being resumed and even the newer projects are seeing timely executions. Although the current growth profiles of US/Europe OEMs are weak, the strong intent to participate and compete against Chinese OEMs are driving the futuristic investments in SDV, ADAS and Connectivity areas. Beyond Automotive, the underlying demand within M&C remains challenging, while Healthcare should drive growth in H2 backed by multiple wins. On margin, it has fairly exceeded our estimate by 100bps QoQ, hence we are passing the benefits to FY26. We are revising our margins up by 20bps/40bps/60bps due to Q2 beat for FY26E/FY27E/FY28E. We expect CC revenue to decline by 5.1% (-5.9% QoQ earlier) in FY26E and grow by 9.4%/11.2% YoY in FY27E/FY28E. Considering the early green shoots on Transportation, we are assigning 36x PE to Sep’27 EPS, translating a TP of 5,010. Upgrade to REDUCE (SELL earlier).
