Tata Elxsi shares surge 8% after JPMorgan upgrades stock with high 'sell' ratings

Shares of Tata Elxsi Ltd. gained as much as 8.5% on Wednesday, January 7, as brokerage firm JPMorgan upgraded the stock and also raised its price target.

The brokerage now has a "neutral" rating on Tata Elxsi from the previous "underweight" stance, along with a revised price target of ₹4,800 from the earlier ₹4,000 apiece. Despite the upgrade, the revised price target implies

a potential downside of 17% from current levels.

JPMorgan has also upgraded its revenue estimates for financial year 2026-2028 by 1% - 4% and margins by 10 to 100 basis points, driving a 1%-8% earnings per share (EPS) upgrades.

The revenue upgrades are driven by improving ER&D demand, especially in the EU, which is the company's biggest market, the analyst said.

The Tata Elxsi stock has underperformed and is down 19% in the last year compared to Nifty IT was is down 14%.

The company should benefit from improving auto demand, but that is at a lower 55% of revenues compared to 82% and 100% for Tata Tech and KPIT Tech respectively, the brokerage said.

This should keep earnings upgrades limited, while valuations remain at a premium to both Tata Tech and KPIT Tech — 34x compared to 43x at Tata Elxsi — and overall growth at an 11% revenue compound annual growth rate (CAGR) is also below 14% at KPIT Tech, which keeps the brokerage at "neutral" it said.

JPMorgan said it believes earnings upgrades with an improving demand environment should keep further downside limited from here.

It has raised its target price-to-earnings multiples to 32 times from 28 times on the back of its earnings upgrades.

Tata Elxsi shares gained 8.5% to hit an intraday high of ₹5,799 apiece on Wednesday. It has risen 14.7% in the past month and has declined 11.7% in the past year.

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