Tata Elxsi stock zooms 725 per cent in three years, what should investors do?

Shares of Tata Elxsi have delivered 725 per cent returns in the last three years. Stock of the Tata Group firm, which stood at Rs 956 on April 18, 2019 rose to Rs 7,889 on Thursday. An investment of Rs 1 lakh in the Tata Elxsi stock three years ago would have turned into Rs 8.25 lakh on April 21, 2022. On the other hand, Sensex has risen 47.92 percent during the period.

Tata Elxsi stock hit an intraday high of Rs 8,190.95, rising 4.9 per cent on April 21.

The large cap stock stands higher than the 50-day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.

Prashanth Tapse, Vice President (Research), Mehta Equities said, "Technically, the uptrend is intact on the long-term charts with targets of Rs 10,000 mark while in the near-term, the stock could correct amid overbought conditions. Buying on corrective declines should be the preferred strategy."

The stock has gained 163.18 per cent in one year and risen 34.47 per cent in 2022. A total of 0.65 lakh shares of the firm changed hands amounting to a turnover of Rs 52.05 crore on BSE.Market cap of the firm rose to Rs 49,284 crore on BSE. Later, the stock ended 1.23 percent higher at Rs 7904 on BSE. The stock hit a 52-week high of Rs 9420 on March 31, 2022 and a 52-week low of Rs 2998 on April 22, 2021.

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AR Ramachandran, Co-founder & Trainer, Tips2Trades said," Despite above-average Q4FY22 results and strong guidance for the coming year, due to weaker sentiment in IT stocks, Tata Elxsi hasn't moved up much over the past three sessions. Technically, 7,600 remains a strong support below which 7200 could be a possibility. A daily close above 8180 can be a good trigger for traders to buy for a target of 9,200."

Also read: Rs 21 to Rs 343: This stock turned into a multibagger in three monthsHoldings of promoters of the firm fell to 44.08 per cent at the end of March quarter compared to 44.32 per cent in the December quarter of last fiscal.

FIIs raised their holdings from 11.93 per cent in the December quarter to 13.15 per cent stake in the March quarter. The number of FII investors rose from 278 to 336 in the last quarter. Mutual funds reduced their holdings from 3.60 per cent in the December quarter to 3.16 per cent in the March quarter. Institutional investors raised their holdings from 17.47 per cent in the December quarter to 18.09 per cent in the March quarter.

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Two promoters held 44.08 per cent stake or 2.74 crore shares in the firm and 4,13,750 public shareholders owned 55.92 per cent for the quarter ended March 2022. Of these, 3,98,862 public shareholders held 30.18 per cent stake with capital up to Rs 2 lakh.

Twenty-nine shareholders held 13.64 lakh shares with share capital in excess of Rs 2 lakh. While 292 foreign portfolio investors (FPIs) held 81.91 lakh shares in Q4 of the previous fiscal.  Tata Elxsi has outperformed its peers in terms of stock market returns in the last three years. While Shares of Info Edge have gained 142.6 per cent stock of Wipro climbed 89 per cent in the last three years.

Also read: Rs 62 to Rs 716: This stock turned into a multibagger in one year

Stock of another competitor Mphasis has risen 75.24 percent during the period. The stellar rise in the stock can be attributed to the financial performance of the firm. Tata Elxsi reported a 39 per cent rise in net profit at Rs 160.01 crore for the fourth quarter against Rs 115.17 crore in the corresponding quarter a year ago.

Sales climbed 31.51 per cent to Rs 681.74 crore in Q4 of last fiscal against Rs 518.40 crore in the corresponding quarter of the previous fiscal. Operating profit excluding other income climbed 31.51 per cent to Rs 221.24 crore in the March quarter against Rs 168.04 crore in Q4 of FY20.

Jitendra Upadhyay,Sr Equity Research Analyst ,Bonanza portfolio Ltd said, "We expect the top line to grow at 25% above next couple of years and EBITDA margins would be able to sustain above 30% plus  going forward. We believe that valuations will remain inflated due to the high growth nature of the industry coupled with leading execution and performance by Tata Elxsi among competitors."

On an annual basis, net profit zoomed 49.32 per cent to Rs 549.67 crore in the last fiscal against Rs 368.12 crore for March 2021 fiscal. For March 2020 fiscal, net profit stood at Rs 256 crore. Sales climbed 35.30 percent to Rs 2,470 crore for fiscal ended March 2022 against Rs 1826 crore for the fiscal ended March 2021. For March 2020 fiscal, sales stood at Rs 1609 crore.

Tata Elxsi is amongst the world's leading providers of design and technology services for product engineering and solutions across industries including broadcast, communications and automotive. It provides technology consulting, new product design, development, and testing services.