Tata Elxsi’s focus on niche high growth verticals paying rich dividends but stock is fairly valued

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Tata Elxsi is an embedded software company with focus on design and technology solution. The company’s strength is its niche offering for the auto, media and healthcare segment. The media and healthcare verticals are ramping up well due to global health crisis which has improved prospects for these 2 sectors. Autonomous driving is boosting demand from the Auto sector. Management is aspiring for a 15 – 20 % growth rate and the funnel of new projects is relatively large. We have a neutral weight rating despite rich valuations due strong pedigree and focus on niche high growth verticals. Carona virus pandemic impact has been minimal and normalcy has been restored. Management has indicated that present high margins may not be sustained but operating leverage may ease pressure – 19-07-2021 Price: 4222.70 Rating : Neutral Weight Recommendation: Hold

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