TATAELXSI - Tata Elxsi Ltd Share Price

In the earnings conference call held on October 9, 2025, Tata Elxsi's management provided a positive outlook for the second half of the financial year. Key forward-looking points include:

1. Growth Expectations: Management expressed confidence that the transportation and healthcare segments would achieve double-digit growth in FY '27. Specifically, the automotive sector is expected to perform better in H2 compared to H1, with increased demand driven by software-defined vehicles (SDVs) and electrification.

2. Financial Performance: For Q2 FY '26, Tata Elxsi reported operating revenue of INR 918.1 crores, an EBITDA of INR 193.3 crores (margin of 21.1%), and a PBT of INR 214.7 crores (margin of 22.2%). The U.S. market saw a quarter-on-quarter growth of 7.9%, while the Media & Communications business recorded a 6.8% growth due to large deal ramp-ups.

3. Market Dynamics: The Transportation business, which comprises over 53% of revenues, observed a moderate growth of 0.7% due to strong pipeline momentum from global OEM SDV programs. Furthermore, the launch of new deal agreements, such as the partnership with Suzuki, indicates promising future revenues.

4. Operational Improvements: The company plans to increase utilization rates from 70% to 75% by the end of the financial year and aims for further improvements to 80% in the next fiscal year, which should contribute positively to margins.

5. Challenges and Adjustments: While Media & Communications is under stress due to ongoing M&A activity among clients, management remains cautious about future growth in this segment. The healthcare sector faced a 2.3% decline due to concluded projects, but a strong pipeline is being built for new customers.

Overall, Tata Elxsi's management projected sustainable growth and operational improvements, with targeted efforts to enhance performance across all segments in the coming quarters.

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

Question 1: On the auto or the transportation side, how is the demand trending over the past couple of months and what should we think about R&D spend coming back from the OEM side?

Answer: I feel confident about demand returning. We see positive traction across regions, particularly in Europe and Japan, while the U.S. remains muted currently. I believe H2 will indeed outperform H1, especially due to strong potential in SDV programs and the ramp-up of large deals.

Question 2: Can you quantify the headwinds from the cybersecurity incident in Q2 and what should we expect in Q3?

Answer: The incident resulted in project delays, impacting growth; without it, we would've seen positive CC growth. For Q3, operations should normalize, and we're optimistic about attracting more revenues as we address these issues swiftly.

Question 3: With margins declining in recent quarters, what is the trajectory of margins looking ahead?

Answer: We anticipate a gradual recovery in margins as top-line growth accelerates. We aim to surpass 75% utilization by year-end. While the focus is on improvement, we are confident our margins will rebound from H1 levels.

Question 4: What areas are OEMs keen to spend on within the auto business?

Answer: We observe strong interest in software-defined vehicles, electrification, AD/ADAS, and infotainment systems. Notably, even traditional ICE-related areas are reviving, highlighting our well-placed strategy to capture diverse demands.

Question 5: Do you see stability in the Tier 1 supplier ecosystem within transportation?

Answer: We have shifted focus from Tier 1 suppliers predominantly to OEMs. While Tier 1 engagements have stabilized, we anticipate slight growth here and will maintain engagements with key suppliers to keep our ecosystem robust.

Question 6: Regarding the media segment's growth, will it continue to moderate in the upcoming quarters?

Answer: Yes, while we've achieved large deal ramp-ups, the industry still faces pressures from corporate actions and M&As. Thus, I anticipate moderate growth in H2 compared to the peak we saw due to recent deal closures.

Question 7: Can you provide details about the Bayer deal and its potential impact on the Medical Devices segment?

Answer: The Bayer deal is a multi-year, multi-million dollar contract, signifying a solid foundation for our Healthcare business. Competing against top firms, we've proven our competence, and I'm optimistic this catalyzes growth in the sector going forward.

These summarized questions and answers encapsulate key insights regarding Tata Elxsi's performance and strategic outlook for the upcoming periods.