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Choice Broking downgrades Tata Elxsi; what it says on HAL, Ashok Leyland and Hindware

Choice Broking downgrades Tata Elxsi; what it says on HAL, Ashok Leyland and Hindware

Brokerage firm Choice Broking has shared its views on select stocks including Hindustan Aeronautics, Ashok Leyland, Tata Elxsi and Hindware Home Innovation.

Pawan Kumar Nahar
Pawan Kumar Nahar
  • Updated Apr 1, 2025 2:27 PM IST
Choice Broking downgrades Tata Elxsi; what it says on HAL, Ashok Leyland and Hindware Barring the Tata Group stock, the brokerage has maintained its hold rating on all other three stocks, citing a 20-25 per cent upside potential.

Domestic brokerage firm Choice Broking has shared its views on select buzzing stocks including Hindustan Aeronautics (HAL), Ashok Leyland, Tata Elxsi and Hindware Home Innovation. Barring the Tata Group stock, the brokerage has maintained its hold rating on all other three stocks, citing a 20-25 per cent uspide potential in these stocks, despite the rising volatility in the stock markets.

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Hindustan Aeronautics | Rating: Buy | Target Price: Rs 5,000

GE Aerospace successfully delivered the first F404-IN20 engine to HNAL, marking the commencement of a contract signed in August 2021 for 99 engines. HAL is set to deliver 12 Tejas Mark-1A fighter aircraft this calendar year, with an annual production rate of 24 aircraft expected from next year onward. This positive development is likely to bolster investor confidence, said Choice.

 

"We expect Rs 2,50,000 crore order book by FY26, owing to its involvement in major defense programs such as Tejas Mark 2, AMCA, TEDBF, LUH, LCH Prachand, and IMRH. While LUH, LCH, and IMRH are progressing as planned, Tejas Mark 2, AMCA, and TEDBF have faced delays. Our investment view remains unchanged, a 'buy' with the target price of Rs 5,000, with Tejas Mark 2 engine agreement being the catalyst to watch out in the coming months," it added.

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Ashok Leyland | Rating: Buy | Target Price: Rs 260

Despite Switch Mobility UK’s revenue growth from £13.9 million in FY23 to £24.8 million in FY24, its contribution to Switch’s total revenue declined from 60.7 per cent to 37.2 per cent, as Switch Mobility India outpaced it with stronger growth. Switch UK accounted for only 0.7% of AL's consolidated revenue in FY24, highlighting its diminishing relevance at the top line, said Choice.

 

"We expect the cessation of Switch UK’s operations to have a 2-4 per cent impact on Ashok Leyland's consolidated net profit in the short term due to a one-time payout of £5–10 million. The move is likely to be positive in the long run, reducing cash burn and improving economies of scale in India. We do not revise our estimates following the Rs 700 crore defense order. We maintain a ‘buy’ rating with a target price of Rs 260," it said.

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Hindware Home Innovation | Rating: Buy | Target Price: Rs 253

Hindware's consumer products business has been loss making at the Ebitda level and has always been a drag on its core financials. Separating the 2 businesses is a welcome development and would most likely rerate the building products business. Consumer products business, despite being loss making at Ebitda level, may be ascribed a positive value by the market as management’s focus on kitchen appliances sub-segments may show a path to profitability, said Choice Broking.

 

"We continue to maintain a 'buy' rating on the stock with a target price of Rs 253. We would factor in the benefits of the composite scheme of demerger revising higher the valuation multiple of building products business and ascribing a positive value to the consumer products business, as proposed demerger scheme receives the requisite regulatory approvals," it added.

 

Tata Elxsi | Rating: Hold | Target Price: Rs 4,900

Tata Elxsi may face revenue challenges due to uncertainty over Trump-era tariffs, impacting European auto companies and TELX's revenue. With 30 per cent of revenue from the US and 40 per cent from Europe, any reduction in IT spending or delays in contracts could slow growth. Currency volatility poses margin risks, but stable tariffs may boost demand, said Choice.

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"It aims to return to an EBIT margin of 25-26 per cent through improved top-line growth, better billability, and utilization, following the completion of the wage hike cycle. Tata Elxsi's performance fell short of expectations, with broad weaknesses across business segments. Healthcare saw slight improvement, but transportation and media remained weak. We have reduced our revenue estimates by 12-17 per cent, downgraded rating to 'hold' with lowered target price at Rs 4,900," it added.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
Published on: Apr 1, 2025 12:49 PM IST
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