This Tata Group stock is down 45% from its 52-week high; should you buy, sell or hold?

Shares of Tata Elxsi turned positive on Wednesday after falling for five straight sessions. The stock rose 0.44 per cent to close at Rs 5,952.30 over its previous close of Rs 5,926.25. Considering the closing level of Rs 5,952.30, it traded 4.28 per cent higher from its one-year low of Rs 5,708.10, hit on December 26, 2022. That said, the scrip has slumped 44.68 per cent from its 52-week high of Rs 10,760.40, a level seen on August 17 last year.

On Tuesday, Tata Elxsi and Alps Alpine (a Japanese manufacturer of electrical components and in-vehicle information systems) announced a strategic long-term agreement to establish a global engineering center at its campus in Thiruvananthapuram. The engineering center would focus on software-led innovation and engineering to support Alps Alpine's vision for future mobility, the company said.

On the earnings front, the design-led technology service provider reported a 28.97 per cent rise in net profit to Rs 194.68 crore during the December 2022 quarter (Q3 FY23) against Rs 150.95 crore in the same period a year ago (Q3 FY22). Revenue from operations came at Rs 817.74 crore in Q3 FY23.

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Support on the counter could be seen at Rs 5,880, followed by Rs 5,800 and Rs 5,700 levels, analysts said.

Osho Krishan, Senior Analyst - Technical & Derivative Research at Angel One, said, "Tata Elxsi is in a secular downtrend and is hovering below all its major moving averages on the daily charts. The stock has shed nearly 45 percent from its lifetime highs and is trading with a negative bias. The immediate support is placed around Rs 5,800, followed by the swing low of Rs 5,700. As of now, there is no sign of respite from the sell-off and it is expected to remain under the corrective phase. On the flip side, a series of resistance is situated right from the Rs 6,400 to Rs 6,800-odd zone."

Ravi Singh, Vice-President and Head of Research at Share India, said, "The stock price has shown a pullback taking cues from the recovery in benchmark indices. It may go up to the level of Rs 6,050 in this momentum. However, fresh buying may initiate only if the stock consolidates around Rs 6,100 levels for two to three days for a target of Rs 6,300 in the near term."

Ravi Singhal, CEO at GCL, said, "The company's quarterly results are good but the stock's P/E ratio is very high. The average P/E is 40, still, it is trading at a P/E ratio of 55. So, we think there's one more round of correction left. The share price may drop up to Rs 5,000. However, at those levels, it is a good investment bet for the long term. We suggest accumulating near Rs 5,000 level for a long-term target of Rs 7,500 in the next one year.

AR Ramachandran from Tips2trades said, "Tata Elxsi looks bearish but oversold as well on the daily charts with strong resistance at Rs 6,030. A daily close above this level could lead to targets of Rs 6,190-6,400 in the near term. Support will be at Rs 5,880."

The stock traded lower than the 5-day, 20-, 50-, 100- and 200-day moving averages. The counter's 14-day relative strength index (RSI) came at 33.75. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company's stock has a price-to-equity (P/E) ratio of 51.94.

Tata Elxsi has an average target price of Rs 7,483.60, Trendlyne data showed, suggesting a potential upside of 25.65 per cent. The scrip has a one-year beta of 0.83, indicating average volatility.

Tata Elxsi is a subsidiary of Tata Sons, holding company of the Tata Group. It provides of design and technology services across industries including automotive, broadcast, communications, healthcare, and transportation. The company aims to help customers reimagine their products and services through design thinking and the application of digital technologies such as IoT (Internet of Things), cloud, mobility, virtual reality and artificial intelligence.

The domestic benchmarks would be closed on Thursday due to 'Ram Navami'.

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