21 Apr , 2025 By : Debdeep Gupta
Tata Elxsi stock prices rise 6.9 percent as its highest in 8 months, with its latest earnings performance for the March quarter falling short of even modest expectations. Simultaneously, triggering a downgrade from Morgan Stanley with the target price revised to Rs 4,660 a share.
The brokerage is maintaining an 'Underweight' rating, noting that while some ramp-up in automotive deals is possible, the media segment remains soft, macro challenges persist, and the stock’s rich valuation leaves it vulnerable to further downside.
Morgan Stanley flagged a weak revenue exit run-rate, suggesting the earnings downgrade cycle could persist. "Despite some deal wins, the lack of supportive macro tailwinds and continued softness in key segments could weigh on the stock," the brokerage said in its note. It expects the market to reprice the stock further, given the high valuations and muted near-term outlook.
The drag in performance was most evident in the transportation vertical, which contributes over half of Tata Elxsi’s software services revenue. Revenue from the segment dropped nearly 10% sequentially and slipped marginally year-on-year. CEO Manoj Raghavan attributed the weakness to "trade and geopolitical uncertainties" that led top auto clients—especially in the US and Europe—to pause several projects.
This follows recent tariff-related disruptions. Earlier this week, US President Donald Trump said he was reviewing 25% tariffs on foreign autos and auto parts—initially announced in March—which could substantially raise car prices. These developments have clouded near-term visibility for players like Tata Elxsi, which are closely tied to global auto capex cycles.
Despite the near-term headwinds, Raghavan maintained a cautiously optimistic tone, stating that the company expects to see growth visibility from top customers in the current quarter.
For the March quarter, the company reported a net profit of Rs 172 crore, down 13 percent year-on-year and below analyst estimates of Rs 182 crore, according to LSEG data. Revenue rose marginally to Rs 908 crore but also missed the Street's expectation of Rs 924 crore.
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