Research Paper
Dalal & Broacha Stock Broking Pvt. Ltd.
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Initiating Coverage @ Dalal & Broacha
Tata Elxsi Ltd.
September 12, 2012
multiple triggers ahead ....
BUY Current Pri ce Target Price Upside 52 Week Range
KEY SHARE DATA Market Cap EV / Sales EV / EBIDTA Volume (BSE + NSE) No of o/s share mn Face Value Book Value BSE / NSE Reuters Bloomberg
Shareholding (%) Period Promote rs MF / Ba nks / FI FII Publ i c & Others Total
130 120 110 100 90 80 70 60 50
Apurva Shah (Research Analyst) (022) 6714 1449 Milind Karmarkar (Head Research) (022) 6630 8667 Nilay Dalal (Equity Sales) (022) 6714 1443
Investment Case:
Rs 233 Rs 283 21% Rs 167 / Rs 254
Rs 7.3 BN/$0.1BN 1.4 9.9 48737 31.1 10 61.7 500408 / TATAELXSI TTEX.BO TELX IN Equity
Jun‐12 45.1 7.9 1.8 45.2 100.0 Mar‐12 45.1 8.8 2.2 43.9 100.0
Coming out of a bad patch between 2008-2011 due to ramp down of one of its clients in Japan, we expect Tata Elxsi (TELX) to grow at greater than 20% yoy in top line over next few years. Though the overall growth in the company looks muted for the above reason, other geographies have delivered a robust growth during the same period. Japan now contributes only 10% to the total revenues from the previous 35-40%.
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Besides the above, growth during above period was muted because of Disappointment in Visual computing business both in revenue and profitability Slower than expected rollout of key technologies and slowdown in global economy
Going forward the main growth driver for the company will be the embedded product design and the industrial design businesses. We believe that with the growth in R&D spend in automotive segment and the multibillion dollar opportunity in ICT as well as roll out of LTE would be the key growth drivers for TELX going forward. We also expect the VCL to breakeven by next year. We expect both the ROCE & ROE to be above 30% by FY14 (18.5% ROE and 23.3% ROCE in FY12) due to low capex requirements and improvement in
. . . . . . . . . .
Initiating Coverage @ Dalal & Broacha
Tata Elxsi Ltd.
September 12, 2012
multiple triggers ahead ....
BUY Current Pri ce Target Price Upside 52 Week Range
KEY SHARE DATA Market Cap EV / Sales EV / EBIDTA Volume (BSE + NSE) No of o/s share mn Face Value Book Value BSE / NSE Reuters Bloomberg
Shareholding (%) Period Promote rs MF / Ba nks / FI FII Publ i c & Others Total
130 120 110 100 90 80 70 60 50
Apurva Shah (Research Analyst) (022) 6714 1449 Milind Karmarkar (Head Research) (022) 6630 8667 Nilay Dalal (Equity Sales) (022) 6714 1443
Investment Case:
Rs 233 Rs 283 21% Rs 167 / Rs 254
Rs 7.3 BN/$0.1BN 1.4 9.9 48737 31.1 10 61.7 500408 / TATAELXSI TTEX.BO TELX IN Equity
Jun‐12 45.1 7.9 1.8 45.2 100.0 Mar‐12 45.1 8.8 2.2 43.9 100.0
Coming out of a bad patch between 2008-2011 due to ramp down of one of its clients in Japan, we expect Tata Elxsi (TELX) to grow at greater than 20% yoy in top line over next few years. Though the overall growth in the company looks muted for the above reason, other geographies have delivered a robust growth during the same period. Japan now contributes only 10% to the total revenues from the previous 35-40%.
. .
Besides the above, growth during above period was muted because of Disappointment in Visual computing business both in revenue and profitability Slower than expected rollout of key technologies and slowdown in global economy
Going forward the main growth driver for the company will be the embedded product design and the industrial design businesses. We believe that with the growth in R&D spend in automotive segment and the multibillion dollar opportunity in ICT as well as roll out of LTE would be the key growth drivers for TELX going forward. We also expect the VCL to breakeven by next year. We expect both the ROCE & ROE to be above 30% by FY14 (18.5% ROE and 23.3% ROCE in FY12) due to low capex requirements and improvement in