Tata Elxsi (TELX IN) – Q4FY26 Result Update – Growth under pressure, Recovery timeline uncertain – Downgrade to ‘HOLD’
Published on 22 Apr 2026
The revenue performance (+0.9% QoQ CC) was below our estimates (+1.2% QoQ CC), attributed to delayed deal closures within Healthcare vertical, down 13.7% QoQ. Media and Communications supported the overall growth, while Transportation growth was muted sequentially. The overall OEM mix (~77% of revenue) is improving within Transportation, which should drive a steady state going forward, although it anticipates Transportation to grow high-single digit in FY27E. We believe the underlying spending pattern within M&C and H&L is sporadic and require couple of more quarters to derive predictable growth within these verticals. Near-term M&C performance is largely benefiting from a planned execution of large deal, otherwise the ground reality remains weak due to consolidation and M&A activities within the space. On margin, it exceeded our estimate by 120bps QoQ, attributed to improving utilization (at ~73% in Q3), it aspires to achieve 80% utilization with a combination of deploying automation and AI. Additionally, we believe the decoupling of revenue growth and talent hiring would provide incremental margins levers. We expect CC revenue growth of 6.0%/10.0% YoY (8.4%/11.4% earlier) in FY27E/FY28E. We are assigning 30x PE to FY28 EPS, translating a TP of INR 4,800. Downgrade to HOLD (BUY earlier).
