Is Tata Elxsi a Multibagger Stock based on Warren Buffet Analysis?

Is Tata Elxsi a Multibagger Stock based on Warren Buffet Analysis?

Tata Elxsi Ltd.

NSE Code TATAELXSI.NS
BSE Code 500408
URL https://www.tataelxsi.com/
CMP 850
Free Report Yes
Publish Date May-24-2019

In this post we would like to Explore the Multibagger Stock Potential of Tata Elxsi. This is based on a blog reader request.

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Tata Elxsi provides product design and engineering services to the consumer electronics, communications & transportation industries and systems integration and support services for enterprise customers. It also provides digital content creation for media and entertainment industry.

Company is Core Technology oriented & should benefit from upcoming IoT trends, Robotics, 3D printing, Autonomous Vehicles, Nanotechnology, AI, Automation, ML etc.

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Tata Elxsi implements and integrates complete systems and solutions for specialized applications such as High-Performance Computing, Computer Aided Design, and Virtual Reality.

Globally, telecom operators are moving towards virtualization and creating Software Defined Networks (SDN) to reduce capital & operating expenditures.  Tata Elxsi has a comprehensive portfolio of SDN and virtualization services.  In the past year Tata Elxsi has been chosen by Airtel as Technology Partner.  The company has developed and integrated key software components to ensure that the Android TV application suite provides a seamless user experience whether the viewer accesses online or offline content.   Tata Elxsi has also partnered with Zee Entertainment multi-platform front-end application development of its new digital entertainment platform.

Positive Factors

Company is showing Consistent EPS Growth of 20% above in the Past 5 years.

Company has high ROCE 56% and ROE 37%.

Company has a Strong Moat of Technology Talents, Patents & Products.

Company gained several awards in categories of Best Electronics Design Company, Supplier Excellence, Women Empowerment etc.

Company has licensed Autonomous Vehicle Middleware PLatform AUTONOMAI scaled to Top 5 in world.

From the House of TATA.  Thus gets Preferred Supplier benefit from JLR (Jaguar Land Rover)

Company expanded its Solution Portfolio with 3D Printing in past year.

Company is growing in SDN segment.

Tata Elxsi is Debt Free.

Company had issued bonus shares in the ratio of 1:1 to all shareholders  past year.

Company is witnessing Increase in Net Reserves.

Company has good Revenue & Net Profit Growth.

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Tata Elxsi is gaining various awards in respective fields.  It have been awarded the Jaguar Land Rover Supplier Excellence Award for 2017. This award recognizes
excellent on-time delivery, continuous quality, technical innovation and consistently meeting production and design challenges. This is a testimony to the customer focus and delivery excellence that Tata Elxsi provides to its clients.

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Concern Factors

Profit & Loss Statement shows Other Income of 43 Crores constituting 20% of Net Profit. Thus the Real Net Profit Margin should be re-calculated for Growth positioning.

Company have 90% Revenue from Global customers. Any Global slowdown affects the Revenue of the company.

Company is trading 5X of book value.

Debt is Zero. It is Good but also says company is Reluctant on Leveraged Growth.

Employee Bad Reviews are bit high about the company. Link

Warren Buffet, Value & Growth Checklist

Following are the Checklist parameters:

Capitalization 5000 Crore (Largecap) – but ample growth opportunity is there. green
History of Consistently Increasing Sales, Earnings & Cash Flow Yes. green
Durable Competitive Advantage Yes. green
Future Growth Drivers / Sector Growth Yes. green
Conservative Debt (long term debt < 3 Net Profit) Yes green
Debt Equity Ratio, Current Ratio Debt is Zero.

Current Ratio is 5.3

superb
Return on Equity must be Above Average Yes. ROE is whopping high of 37%!! superb
Low CAPEX required to maintain current operations Yes. green
Inventory Turnover Ratio, Debtor Days, ROCE Constant yellow
Management is holding / buying the stock Flat yellow
Market Price < Intrinsic Value Yes. Intrinsic Value at Rs. 1800 Intrinsic Value Calculator green
Stock Price is consolidating (now) Yes green
Stock Price is growing in past years along with EPS growth Yes. green
Consolidated PE, PB Ratio, PEG Ratio PE 20 (high)

PB 5 (high)

PEG 0.4 (Good)

yellow
Cash Flow Positive, Net Profit % greater than 8% Cash Flow: Negative

Net Profit: Yes

green
Paying Dividends, Tax Yes green
EPS Growth Rate 20% above green
Jump in Trailing Result EPS Yes green
Jump in Quarterly Result EPS Yes green
Expected Gain in 5 Years 400-500% green
Price Movement Graph, 52 Week High & Low Okay green
Volume Analysis 2.5 Lakh yellow
Power of Brand Yes green
Corporate Governance, Reputation of Leaders Yes green
Fraud reported No.  But high remuneration ration & increments for core promoters green

Summary

Based on the above analysis I would like to say that the Tata Elxsi possess Multibagger Stock properties.  Company aligns with Warren Buffet principles of Value & Growth Investing.  It  can be considered as Low Risk High Returns investment.

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More Free Multibaggers

You can find More Free Multibaggers here.

https://futurecaps.com/free-multibaggers-2019/

Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice.  The Investor is advised to do due diligence in the scrip mentioned.  None of Futurecaps Advisors hold 1% above Holdings of this company.

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