Tata Elxsi shares sink nearly 2% after disappointing Q1

Tata Elxsi’s shares fell by nearly 2% on Thursday after the company announced a 2.5% year-on-year (YoY) decline in net profit for the first quarter of FY25 to ₹184.1 crore. The Tata Group firm’s revenue from operations was up 9% YoY to ₹926.5 crore. During the first quarter, the company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) saw a marginal growth of 0.3% YoY to ₹252.3 crore.

Tata Elxsi’s EBITDA margins for the quarter contracted to 27.2% from 29.6% in the corresponding period last year. Meanwhile, the net profit margin fell to 19.2% from 21.6% in the same period the previous year.

For the quarter that ended June 30, 2024, the company’s Transport vertical saw a growth of 20.3% YoY due to higher deal wins and a rise in Software Defined Vehicles (SDV) engagements. The Media and Telecoms vertical declined 3.8% YoY as it was impacted by a difficult environment in the media and telecom industry. Tata Elxsi’s Healthcare and Life Science vertical was down by 0.5% for the quarter while other verticals declined by 5.5% YoY.

The company reported a 17% YoY growth in its System Integration and Support segment while the Software Development & Services segment grew 8.1% YoY. Manoj Raghavan, chief executive officer and managing director of Tata Elxsi, stated that quarterly performance was impacted by a one-off expense and a rise in the effective tax rate. The company’s investing in its talent pool, Artificial Intelligence (AI), and Generative AI technologies to improve the company’s topline and manage its bottom line. The company expects to return to its preferred margin band over the year.

“We step into the second quarter of this financial year with the confidence of a healthy deal pipeline, continued growth in our transportation business, new customer wins, and expansion of business with strategic customers across verticals,” he said.

Shares of the company have declined by nearly 20% since the beginning of the year. The stock has lost over 6% in the last one year. However, the stock has been one of the better performers over the longer term – it is up 722% over the past five years -- given its reputation as a company that works on cutting-edge technologies such as artificial intelligence and machine learning.