17 August 2017
Update
| Sector:
Technology
BSE SENSEX
31,771
S&P CNX
9,897
Tata Elxsi
Buy
CMP: INR1,692
TP: INR1,992 (+18%)
Optimum blend of design and technology
Exciting opportunities ahead
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Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
TELX IN
31
1775 / 1022
0/3/-9
50.6
0.8
714
55.4
Tata Elxsi (TELX) held its investor meet in Mumbai, where Mr Madukar Dev (CEO) and Mr
Nitin Pai (Head – Marketing) spoke in detail about its businesses and strategy for future
growth. The company remains confident of exploring opportunities that lie ahead in its
specialized verticals of automotive, video broadcasting, healthcare and industrial design
& visualization. The company plans to identify technologies that can be implemented in
these verticals and then build capabilities to invest in solutions. With the advent of
Internet of Things (IoT), Robotics and AI, etc., the focus would be on adopting such
technologies and blending it with solutions such as OTT, driverless cars and automated
testing to cater to various ecosystems, including consortiums, R&D institutions, start-ups
and silicon vendors.
Automotive – use of electronics in transportation to provide opportunities
Automotive continues to be the fastest-growing and highest revenue contributor
(~48% of overall revenue and ~60% of EPD revenue) for the company. Growth in
the segment has been primarily driven by investments in solutions related to
infotainment, active safety, connected cars, and body electronics, among others.
The company’s advanced autonomous vehicle middleware platform ‘AUTONOMAI’
was recently licensed by one of the world’s top five automotive OEMs for its
driverless car R&D. The platform not only provides carmakers and tier-1
automotive suppliers with a solution covering perception, GNC and drive-by-wire
systems to build, test and deploy autonomous vehicles, but also allows rapid
region-specific adaptation through its pre-integrated validation datasets and AI &
deep-learning capabilities.
The company has also implemented solutions like “ConnectNext” infotainment for
Zest and “JukeCar” app for Tiago. However, the primary focus, going forward,
would be to further develop capabilities in active safety, with implementation of
driverless cars as the end-goal.
The company recently conducted a study for a leading German OEM, visualizing the
services a car would offer by CY25. TELX is building capabilities on similar lines with
a view to develop intelligent cars, which would provide customized services to the
user. The car would not only monitor the location and speed of itself, but also of
surrounding cars, keeping the user informed at all times regarding the decision the
car intends to take (whether to overtake or follow).
With the use of electronics in cars on the rise, TELX will continue identifying
technologies that can be molded and implemented in the automotive segment,
providing the company with enough opportunities to grow, in our view.
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
12.3
14.2
16.4
EBITDA
2.9
3.4
4.0
PAT
1.8
2.1
2.5
EPS (INR)
56.3
67.4
79.7
Gr. (%)
13.2
19.7
18.3
BV/Sh (INR)
179.5 222.9 272.6
RoE (%)
37.1
33.5
32.2
RoCE (%)
37.1
33.5
32.2
P/E (x)
30.1
25.1
21.2
P/BV (x)
9.4
7.6
6.2
Shareholding pattern (%)
As On
Jun-17 Mar-17 Jun-16
Promoter
44.6
44.6
44.6
DII
6.5
5.9
3.5
FII
10.1
9.0
12.5
Others
38.9
40.5
39.4
FII Includes depository receipts
Stock Performance (1-year)
Tata Elxsi
Sensex - Rebased
2,000
1,750
1,500
1,250
1,000
Niket Shah – Research analyst
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Aksh Vashishth – Research analyst
(Aksh.Vashishth@MotilalOswal.com); +91 22 6129 1553
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.