MOSL: TATA ELXSI (Buy)-Strong margin steals the limelight
Tata Elxsi: Strong margin steals the limelight
(TELX IN, Mkt Cap USD1.3b, CMP INR1464, TP INR1700, 16% Upside, Buy)
- Marginal miss on growth, but more than offset by margins: TELX's 18% YoY growth to INR3.8b was a tad lower than our expectation of +21%. EBITDA margin expanded 520bp YoY to 27.9% (490bp beat). Consequently, PAT grew 42% YoY to INR705m (19% beat).
- Remain positive on outlook: TELX has seen a gradual increase in its growth rates after hitting a bottom in 1QFY18, from 9% YoY to 18% YoY now. It has come off FY18 facing challenges in some major engagements and setbacks in the vertical of Broadcast. A positive outlook has been tying in well with the growth acceleration and the strong start to FY19. Maintenance of current momentum translates into ~18% growth in FY19, a stark improvement from 12% in the previous year.
- Profits maintained despite investments: To stay ahead of the curve, TELX has been early at developing competencies in new technologies. Despite investments, it has been seeing an uptick in margins. Although the company expressed its intent to cap margin expansion at 25% and plough additional benefits back into the business, margins in the quarter saw an expansion on all counts.
Tata Elxsi Limited is engaged in the design and development of computer hardware and software. The Company operates in two segments: System integration & support, and Software Development & Services. Its system integration & support segment is engaged in implementing and integrating systems and solutions for computing, broadcast, virtual reality, storage, and disaster recovery. Its software development & services segment comprises three business divisions: Embedded Product Design, which provides technology consulting, new product design, development, and testing services for the broadcast, consumer electronics, healthcare, telecom and transportation industries; Industrial Design (ID), which services a range of industries, including automotive, consumer electronics, retail and consumer goods and healthcare, and Visual Computing Labs (VCL), which provides three dimensional (3D) animation services, addressing content development for feature films, television and advertising commercials.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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