Earnings Outlook
Weakness in transport, media ops to hit Tata Elxsi Q1 sales
This story was originally published at 12:38 IST on 9 July 2025
Register to read our real-time news.Informist, Wednesday, Jul. 9, 2025
By Arya S. Biju
MUMBAI – Design and technology services company Tata Elxsi Ltd. is expected to start the financial year 2025-26 (Apr-Mar) on a subdued note with both top line and bottom line likely to decline on a sequential as well as year-on-year basis in the June quarter. Continued weakness in the transportation, and media and communications verticals is expected to drag the company's top line for the quarter.
With the US tariff-led uncertainty causing original equipment manufacturers to delay decisions on new projects, and also delay ramping up signed ones, analysts widely expect engineering research and development companies such as Tata Elxsi to report weak earnings in the Apr-Jun quarter. Further, China's curb on exports of rare earth elements is seen as an added headwind that will exacerbate the weakness in the automotive business of these companies.
The Tata group company's bottom line for the quarter is expected to fall a little over a percent sequentially to INR 1.70 billion, according to the average of estimates from five brokerages. On a year-on-year basis, profit after tax is seen down over 7%. HDFC Securities Ltd. has the highest estimate of INR 2.06 billion for net profit while ICICI Securities Ltd. has the lowest estimate of INR 1.51 billion.
The company's revenue for the June quarter is expected to decline by almost a percent sequentially and nearly 3% on year, to INR 9.03 billion, according to the average of estimates. Nirmal Bang Equities Pvt. Ltd. has the highest estimate of INR 9.28 billion for the company's top line, while Prabhudas Lilladher Pvt. Ltd. has the lowest estimate of INR 8.90 billion.
In constant currency terms, Tata Elxsi's revenue for the June quarter is expected to decline 2.5-3.0% on a sequential basis, estimates from four brokerages showed. Kotak Institutional Equities expects the company's revenue to decline 2.6% on quarter in constant currency terms, led primarily by a mid-to-high single-digit decline in revenue from the media and communications vertical and a modest decline in sales from the transportation vertical.
During the previous quarter, the transportation vertical, which contributed over 53% to the company's total revenue, had fallen nearly 10% on quarter in constant currency terms. Revenue from the media and communications segment, which contributed over 32% to the company's total sales, had declined over 6% sequentially in the same period. Kotak Equities expects the transportation vertical's revenue to be affected due to general weakness in the spending environment and moderating spends by top clients. However, ICICI Securities sees a healthy growth in revenue from Tata Elxsi's healthcare vertical, on ramp-ups of new deals. During the previous quarter, revenue from this segment had risen over 6% sequentially.
ICICI Securities also expects a boost to the company's total deal contract value due to the large deal it signed with Mercedes-Benz Research and Development India. This deal is for vehicle engineering and software-defined vehicle development.
Analysts are divided on how Tata Elxsi will fare on the margin front. Prabhudas Lilladher and Kotak Equities expect the company's earnings before interest and tax margin to contract by 100 basis points and 10 bps on quarter, respectively. Kotak Equities expects large deal transition costs and a likely weak top line growth to drive a sequential contraction in the company's EBIT margin for the latest quarter.
However, Nirmal Bang Equities expects tighter cost control measures and absence of cost pressure to boost the company's margin by 70 bps on quarter. HDFC Securities expects margin to expand 44 bps.
ICICI Securities said discretionary cost control and operating levers will offset headwinds from the fall in revenue and this will keep the company's margin flat.
Tata Elxsi will announce its June quarter earnings Thursday. Investors will watch out for management commentary on recovery in the transportation segment and impact of the curb on exports of rare earth elements by China. They will also watch for the impact on client decision-making due to new policies and tariff announcements by the US.
Investors will also keenly watch for management commentary on margin levers and a guidance for FY26. The outlook for software development and services, and media verticals will also be monitored, along with details about the deal with Mercedes-Benz Research and Development India.
At 1233 IST Wednesday, shares of the company traded 0.9% lower at INR 6,118.50 on the National Stock Exchange. The stock has risen nearly 26% since the announcement of its March quarter earnings on Apr. 17.
The following are the Apr-Jun earnings estimates for Tata Elxsi based on reports from five brokerages in descending order of the estimate of net profit:
|
Broking Firm |
Net Sales (in INR million) |
Net Profit (in INR million) |
EBITDA (in INR million) |
|
HDFC Securities Ltd |
9,030.00 |
2,060.00 |
-- |
|
Nirmal Bang Equities Pvt Ltd |
9,283.00 |
1,779.00 |
-- |
|
Prabhudas Lilladher Pvt Ltd |
8,900.00 |
1,600.00 |
-- |
|
Kotak Institutional Equities |
8,983.00 |
1,576.00 |
2,065.00 |
|
ICICI Securities Ltd |
8,967.00 |
1,509.00 |
-- |
|
Average |
9,032.60 |
1,704.80 |
2,065.00 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Nishant Maher
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