Tata Elxsi’s Q2 results were excellent, but ‘sell’ rating of brokerage firms increased investors’ concerns

Major technology company of Tata Group Tata Elxsi has released its September quarter (Q2) financial results. The company’s performance has been better than market expectations, but despite this, leading stock market analysts are adopting a cautious stance regarding this stock. In view of the company’s quarterly results and future business environment, many leading brokerage houses have advised investors to stay away from this stock or ‘sell’, which has created a situation of confusion among the investors.

Revenue growth and operating margin were better than expected

According to data released by Tata Elxsi, the company recorded constant currency revenue growth of 2.3% in the September quarter, while market analysts were expecting a growth of only 1.5%. Furthermore, the company’s EBIT margin 19.7% Which was 19% in the last quarter and proved to be better than the estimate of 19.2% expressed in CNBC-TV18 poll. On Tuesday, just before the results, the company’s shares closed at ₹ 3,426.70 with a gain of 5.2%. However, it is also a fact that so far this year the stock has fallen by about 35%.

JP Morgan has ‘neutral’ rating and target of ₹3,200

Leading global brokerage firm JP Morgan has… ‘Neutral’ rating while maintaining Target price of ₹3,200 Has been decided, which is about 6.6% below Tuesday’s closing price. The brokerage believes that new automobile orders from the US and the domestic market (India) have supported the company’s revenue, but the weakness of the automobile sector in the European market still remains a major concern.

Management believes that the second half of the financial year may be better than the first half, but JP Morgan assesses that growth in the second half of FY 2027 may slow due to uncertainty in Europe and last year’s high base. Keeping this in mind, the brokerage has cut the company’s earnings estimates for FY2028 and FY2029 by 10-11%.

Motilal Oswal has ‘Sell’ rating, target price ₹2,970

Domestic brokerage firm Motilal Oswal has increased its position on this stock. ‘Sell’ rating has been maintained and by increasing its target price ₹2,970 Which is about 13% below the current market price. According to the brokerage, although all three key sectors may see improvement in the second half, sustainable upside will depend on new orders coming in and revenue generation from them, which usually takes two to three quarters. The slowdown in demand in Europe and the caution shown by customers in spending remains a big challenge for the company.

Mixed opinion of analysts, signs of limited bullishness in the stock

Of the total 19 analysts covering Tata Elxsi 9 said ‘Sell’, 7 said ‘Buy’ and 3 said ‘Hold’. Have advised. It is clear that almost half of the analysts are in favor of selling at this time. Even based on the average target price of analysts, there is currently an indication of a possible rise of only 2% in the stock. Despite good quarterly results, this cautious stance of experts due to weakness and expensive valuations of European markets is a force to think for investors.