Why invest in it:
Company of the Future Businesses.
Electric Cars, Digitalization, IoT (Internet of Things), Robotics, Artificial Intelligence, Augmented Reality, Automation, Nanotechnology, Biotech, Material sciences, Energy storage, Quantum computing.
Tata Elxsi is India’s top company to gain from all future high tech growth areas listed above.
Its 95% earnings come from software development services (SDS). In SDS, ~80% of revenues are derived from embedded product development (EPD), followed by industrial design (ID) & visual computing labs (VCL) contributing 20% to SDS revenues. Within EPD, TATELX caters to 3 core industries –automotive (~40% of EPD revenues), broadcast & consumer electronics (~35%) and communications (~25%).
Auto sector is main market with ~40% of EPD revenues. TATELX works around power train, body electronics, safety and in-vehicle infotainment. Jaguar Land Rover (Tata Motors) is top client of company contributing ~20% to revenues.
Company is focusing on reducing dependency on top accounts. The strategy is to diversify revenue contribution from accounts, and the focus would be to further reduce dependency on selected few accounts.
Profit growth 50% last five years
OPM ~20-25%
ROCE 56%
Why the Company’s Business will Grow for a Long Period
Long Term Growth Drivers
- Adoption of connected electric car would lead to higher usage of software & electronics content in car
- Company is leader in its field. It was awarded the ‘Best Electronics Design Company’ award at the 3rd edition of Electronics Maker Best of Industry Awards 2017.
- It will grow from developments in Digitalization, IoT (Internet of Things), Robotics, Artificial Intelligence, Augmented Reality, Automation, Nanotechnology, Biotech, Material sciences, Energy storage, and Quantum computing.
Immediate Growth Drivers
- Broadcast & consumer electronics (35% of EPD) is engaged with semiconductor vendors, set top box companies and Channels & Broadcasters providing over the top content, helping them reduce engineering costs associated with development. This area is growing steadily.
- Company in its ID division worked for Mumbai Monorail and Airport related to signage design systems and is currently engaged for four railway stations for similar engagement and expects as a big opportunity going ahead for several other railway stations too.