(Reuters) – Indian engineering and technology services firm Tata Elxsi reported a 14.7% rise in its second-quarter profit on Thursday, exceeding street expectations, fuelled by healthy demand in its transportation wing.
The company’s net profit rose to 2.29 billion rupees ($27.28 million) year-on-year for the quarter ended Sept. 30. Analysts had expected 2.05 billion rupees, according to data from LSEG.
Revenue from operations rose 8.3% to 9.55 billion rupees, in line with analysts’ estimate of 9.56 billion rupees.
Revenue from the company’s transportation unit grew 16% year-on-year on the back of deals signed in the quarter, including a $50 million multi-year contract with a European company. The division accounts for about 55.7% of revenue in the company’s software development and services segment, which in turn contributes more than 97% to total revenue.
Shares of the company closed 1.9% higher ahead of results on Thursday.
KEY CONTEXT
Engineering, research and design (ER&D) services, which include technology support to industries such as automotive and communications, contribute a sixth of the revenue to India’s $254 billion technology sector.
Companies such as Tata Elxsi and peer L&T Technology Services are expected to benefit from the ER&D sector quadrupling to as much as $170 billion between 2023 and 2030, India’s National Association of Software and Service Companies has said.
L&T Technology Services will report results on Oct. 16.
PEER COMPARISON
Valuation (next Estimates (next 12 Analysts’ sentiment
12 months) months)
RIC PE EV/EBITDA Revenue Profit Mean # of Stock to price Div yield
growth(%) growth(%) rating* analysts target** (%)
Tata Elxsi TTEX.NS 52.81 37.41 13.26 12.85 Sell 12 1.15 0.90
L&T Technology LTEH.NS 38.56 25.02 10.94 10.88 Sell 26 1.13 0.94
Services
KPIT Technologies KPIE.NS 52.13 31.88 20.58 28.68 Buy 14 0.87 0.40
Tata Technologies TATE.NS 54.75 38.32 12.00 15.23 Hold 9 1.14 0.77
* Mean of analysts’ ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell ** Ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
JULY-SEPTEMBER STOCK PERFORMANCE
— All data from LSEG
–($1 = 83.9470 Indian rupees)
(Reporting by Aleef Jahan; Editing by Abinaya Vijayaraghavan and Janane Venkatraman)
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