Buy or Sell? Nearly 50% analysts tracking this Tata Group stock remain bearish after Q2 results; Check targets

Shares of Tata Elxsi Ltd. will be reacting to their September quarter results on Wednesday, October 14. The results were declared after market hours on Tuesday, which were better than expectations.

However, nearly 50% of the analysts who track Tata Elxsi, continue to have a "sell" recommendation on the stock after its results.

Tata Elxsi reported constant currency revenue growth of 2.3%, well above expectations of 1.5%, while EBIT margins at 19.7% were not only higher than the CNBC-TV18 poll of 19.2%, but also higher than the 19% figure it reported in the previous quarter.

JPMorgan Remains Cautious On Tata Elxsi

JPMorgan has a "neutral" rating on Tata Elxsi with a price target of ₹3,200, which indicates a downside potential of 6.6% from current levels.

The firm said that the positive surprise on Tata Elxsi's growth came from deal wins in auto in the US and India, even as the sector in the European Union remains under pressure.

Despite the company guiding for the second half to be better than the first, excluding the European Union, JPMorgan believes that the higher base of the second half of financial year 2026 would mean that H2 FY27 growth remains lower than H1 due to the EU uncertainties.

The management has also indicated that while margins will improve gradually, it will take time to return to the fourth quarter of financial year 2026 of 22%.

JPMorgan has cut its earnings estimate for Tata Elxsi by 10% to 11%, mainly driven by cuts of 200 to 240 basis points to margin assumptions over financial year 2028-2029.

Even as Tata Elxsi's constant currency revenue growth of 6.6% projected for financial year 2027 is higher than its peers such as L&T Technology Services, KPIT Tech and Cyient, it is reflected in the stock's premium valuations and therefore, JPMorgan believes that the stock is fairly priced.

Motilal Oswal Says "Sell" Tata Elxsi

Motilal Oswal has a "sell" rating on Tata Elxsi but has revised its price target higher to ₹2,970, which still implies a downside potential of 13% from yesterday's close.

The brokerage says revenue growth for Tata Elxsi in the second half of the year will be better thanm the first half, with growth seen across all three major verticals. A sustained acceleration though, will depend upon the deal wins, as new engagements typically take 2-3 quarters to ramp up.

Motilal Oswal has warned that automotive demand in Europe is likely to remain a key growth constraint, as demand remains subdued and with automotive engineering spending and deal closures affected by cautious customer spending and delayed decision making. "The US and India are expected to remain relatively supportive, while growth across other verticals and geographies should partly offset the weakness in Europe," Motilal Oswal's note said.

The brokerage has lowered its Earnings per Share (EPS) estimates for Tata Elxsi by 3% and 1% respectively for financial year 2027 and 2028 to reflect a gradual margin recovery amidst continued investments and an uneven demand environment, particularly in Europe.

19 analysts have coverage on Tata Elxsi, of which seven have a "buy" rating, three say "hold", and nine have a "sell" recommendation on the stock, with the consensus estimate of price targets implying an upside potential of only 2%.

Shares of Tata Elxsi ended 5.2% higher on Tuesday ahead of the earnings announcement at ₹3,426.7. The stock is down 35% so far this year.