Tata Elxsi: A Company you can trust for the Long-Term?

Tata has some big companies under its umbrella but one company that often goes under the radar of investors is Tata Elxsi. The IT company reported stellar results last week and reminded everyone why they should keep an eye on it.

Profile

Tata Elxsi is one of the world’s leading providers of design and technology services across industries. With the help of digital technologies such as IoT (Internet of Things), Cloud, Mobility, Virtual Reality and Artificial Intelligence, Tata Elxsi aims to develop products and services for their customers. All these applications will be used on a huge scale in future as we are all aware of how the world is quickly shifting towards Artificial Intelligence and Data Analytics.

The company started its business on 5th May 1989. Their work revolved around developing applications related to electronics and software. Today they have developed themselves as a premium engineering service provider, not only in India but worldwide. 

They serve a number of industries including automotive, home appliances, semiconductor, media, broadcast, communications, Rail and healthcare sector. They are involved in several activities in these industries. Research & strategy, design & development, test & validation, operate and automate are the main services that Tata Elxsi provides. 

Earlier the cars were just a medium to travel from one place to another. In today's generation, a car fulfils this desire along with entertainment and upgraded experience. The new passenger cars are supported with digital dashboards which come along with different chat supports. 

The combination of digital technologies and analytics provides an even better experience for the passengers. Today's car is not 'just a car'. This was just one of the works which Tata Elxsi carried out in the automobile industries. AI and Virtual Reality will be pivotal in every sector in the future. Thus, the future business prospects of the company are huge which can benefit the long-term investors.

Stellar Q4 F21 results

Even amidst the pandemic, Tata Elxsi produced robust Q3 results this January but they have followed it with even better Q4 numbers. In the last quarter of FY21, Revenues from operations were recorded at Rs 518 crore, 18% higher year-on-year. Profit after tax was declared to increase by a stunning 40.3% YoY at Rs 115 crore. 

Not only this but even EBITDA margin and Net Margin were very strong at 32.4% and 21.9% respectively. This growth was powered by not only one sector but by all the sectors. Tata Elxsi's largest division, Embedded Product Design (EPD), grew by a massive 14.6% as compared to last year. The Industrial Design and Visualization (IDV) segment also showed a robust increase of 9.1% in the same period. 

Not only these segments but transportation, Media and Communications also showed steady growth over last year. Since 2012, Tata Elxsi has consistently reported an increase in total revenues. For the first time in FY20, their profits decreased as compared to the previous year but it has come with an even stronger rebound in FY21. 

EPS or Earnings per shareholder is a metric on which we really stress upon. As a shareholder, it is important for us to see the trend of the EPS of a company. Except for FY20, Tata Elxsi's EPS has increased every year. In the last five years, the company's EPS has more than doubled from 28 to 59.11. In this period, their net income has grown by 5X (20.21%) times as compared to the industry average (4.5%). Overall, the company looks to have very solid fundamentals.

Reliable Future

The Covid-19 pandemic has put focus on the IT sector, especially on the cloud and AI companies. Tata Elxsi is getting strong backing from foreign institutions as well. In March 2020, FII's had a 10.7% stake in the company. This holding increased to 12.06% by March 2021. Generally, increasing foreign institutional holding is considered a positive sign for any company. 

Similarly, the unexpected rise in data and content generation has further aided companies like Tata Elxsi to expand their business. In the last year, the company has given an impressive return of 284%. Tata Motors is considered one of the heavyweights in the Indian electric vehicle dream. 

Elxsi has experience in manufacturing design and engineering auto-related products. They help in designing cloud services and app frameworks for Smart TV and OTT platforms which again have grown massively. Even if there are short-term fluctuations in this stock, a long-term investor might look to hold on to it. Do you have this stock in your portfolio? What are your opinions and findings on Tata Elxsi? Do let us know in the comments section of the marketfeed app!