HDFC Securities Results Report 11-Oct-24

11 October 2024 Results Review Q2FY25
Tata Consultancy Services

Outlook trendline remains positive ADD
Tata Consultancy Services (TCS) posted a mixed quarter with a growth skew
CMP (as on 10 Oct 2024) INR 4,227
from the BSNL deal, but the outlook trendline remains positive. The positive
markers that aid growth visibility are (1) BFSI acceleration, (2) transitory Target Price INR 4,650
factors, for Q2 moderation, (3) strong deal pipeline & commentary on NIFTY 24,998
discretionary spending improving, and (4) pent-up spending on tech
modernisation and incremental opportunity from GenAI (doubling of KEY
OLD NEW
PoCs/engagements). The concerns of broadening vertical portfolio CHANGES
underperformance and the absence of mega deals in H1FY25 are transitory and Rating ADD ADD
client-specific. The margin miss is directly linked to a higher mix from the Price Target INR 4,670 INR 4,650
BSNL deal during the quarter – a natural margin tailwind for FY26E as that
FY26E FY27E
revenue pool recedes. Earnings estimate nearly unchanged – maintain ADD on EPS %
TCS with TP of INR 4.650 based on 28x Dec-26E EPS. -0.2 0.0
▪ BFSI acceleration: Revenue growth of 1.1% QoQ CC in Q2FY25 decelerated

from the previous quarter’s rate of 2.2% QoQ, but the YoY trajectory KEY STOCK DATA
improved to 5.5% YoY CC (following 3.4% CC growth in FY24). TCS’ Q2 Bloomberg code TCS IN
growth was impacted by client-specific scope reduction in the Life-sciences & No. of Shares (mn) 3,618
Healthcare vertical/NorthAm (expected to stabilize & recover in Q3-Q4
MCap (INR bn) / ($ mn) 15,295/182,133
period) and a large customer in the UK geography. BFSI vertical (37% of
revenue) posted its strongest sequential growth over three years at 2.7% QoQ. 6m avg traded value (INR mn) 10,471
Deal wins in the BFSI vertical also increased to USD 2.9bn in Q2 with book- 52 Week high / low INR 4,492/3,296
to-bill improving over Q1 and above the overall bookings. Key drivers of
spend include cost optimization, vendor consolidation, ERP modernization,
STOCK PERFORMANCE (%)
customer experience transformation, supply chain modernization, and
regulatory compliance. The insurance sub-segment is also growing with deals 3M 6M 12M
such as Trygg-Hansa IT estate consolidation and transformation. Absolute (%) 8.1 6.1 17.0
▪ Growth skew from BSNL deal continued; absolute EBIT impact limited Relative (%) 6.0 (2.7) (6.5)
ahead: Growth in the quarter continued to be driven by India/BSNL/CMT
which contributed ~70% of the sequential growth, which was similar to the
SHAREHOLDING PATTERN (%)
mix of the last three quarters. The company has reached the halfway mark for
the rollout of the 4G/5G network for 100k sites that are to be deployed. While Mar-24 Jun-24
the impact of revenue rate dropping post deployment will be material Promoters 71.77 71.77
(factored in Q4FY25E-Q1FY26E), we reckon the absolute EBIT impact is FIs & Local MFs 10.67 11.05
contained on cost normalizing and continuity in maintenance revenue. Deal
FPIs 12.70 12.35
wins improved slightly to USD 8.6bn total contract value in Q2, but lower YoY
with the absence of mega deals (H1FY24 included 2 mega deals of USD 1bn Public & Others 4.86 4.83
each from JLR and BSNL). Pledged Shares 0.20 0.20
Source: BSE
Apurva Prasad
Financial Summary
[email protected]
YE March (INR bn) Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) FY24 FY25E FY26E FY27E
+91-22-6171-7327
Revenue (USD mn) 7,670 7,210 6.4 7,505 2.2 29,080 30,804 32,814 35,401
Net Sales 642.59 596.92 7.7 626.13 2.6 2,408.93 2,581.58 2,789.16 3,044.48 Amit Chandra
EBIT 154.65 144.83 6.8 154.42 0.1 593.11 640.67 724.34 792.48 [email protected]
APAT 119.09 113.42 5.0 120.40 (1.1) 466.35 498.28 562.24 613.87 +91-22-6171-7345
Diluted EPS (INR) 32.9 31.3 5.0 33.3 (1.1) 128.9 137.7 155.4 169.7
Vinesh Vala
P/E (x) 32.8 30.7 27.2 24.9
[email protected]
EV / EBITDA (x) 23.1 21.5 19.0 17.4
RoE (%) 51.6 54.4 59.0 60.4
+91-22-6171-7332
Source: Company, HSIE Research
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Tata Consultancy Services: Results Review Q2FY25
▪ Traction in GenAI & Growth market investments: Sequential growth drag for the
quarter was from the Life-sciences & Healthcare vertical which declined 4.4% and
by Manufacturing and Retail & Consumer which were flat sequentially. On a YoY
basis, E&U and Manufacturing verticals led the growth. There’s traction in
AI/GenAI with the company deploying 600+ AI/GenAI POCs/engagements in
production and there’s demand for AI-infused services (as compared to 275 in Q1).
Importantly 86 engagements went into production in Q2. TCS’ WisdomNext
platform for enterprises and investments in AI experience zones and labs with
open-source technologies and key large language models from AWS, Google, and
Microsoft can support acceleration. TCS plans to increase its footprint in growth
markets – India, APAC, LatAm and MEA regions and is investing to build scale in
these regions. While bookings in NorthAm were lower at USD 4.2bn TCV (vs. USD
4.6bn), Europe & RoW had bookings of USD 4.4bn vs. 3.7bn in Q1.
▪ Underwhelming operating performance, but on track trajectory: Operating
performance was impacted by a continued surge in investments for the large
transformation program, particularly margin-dilutive BSNL deal. EBITM came at
24.1%, -60bps QoQ impacted by (1) -160bps QoQ on account of an increase in
hardware/software cost (INR 11bn increase sequentially), (2) an increase in sub-
contracting impacting margins by -40bps QoQ. Margin impact from the BSNL deal
has peaked and is expected to normalise more materially in FY26E. APAT at INR
119bn was down sequentially and up 5% YoY impacted by lower other income.
DSO including unbilled remained steady sequentially. We have factored EBITM at
24.8% for FY25E with Q4 exit at 25.8%; and factored FY26/27E EBITM at 26% each.
Hardware/software cost is the biggest tailwind for FY26E margin improvement
which will support profit acceleration to 13% in FY25E and 10% CAGR over FY24-
27E.
▪ Headcount adds similar to last quarter: Headcount addition was at a similar clip
as last quarter with 5.7k net adds taking the count to 613k with attrition stable at
12.3%. Learning hours increase of 10% YoY and 37% QoQ reflects an uptick in
fresher intake by the company – it is on track for FY25 fresher adds and has started
the NQT (National Qualifier Test) for FY26 fresher offers.
▪ Outlook and Valuation: TCS’s earnings trajectory has been least volatile over the
past two years, posting double-digit CAGR, and we expect a ~10% EPS CAGR to
continue ahead. We expect TCS’ growth to accelerate from 3.4% CC in FY24 to 5.5%
CC, 6.3% CC and 7.9% CC in FY25E, FY26E & FY27E respectively, implying 1.7%
CQGR in FY25/26E and 1.9% in FY27E. We have factored EBITM at 24.8% for
FY25E with Q4 exit at 25.8%; factored FY26/27E EBITM at 26% each, translating to
10% EPS CAGR over FY24-27E. TCS trades at 27x FY26E, 25x FY27E and our TP of
INR 4,650 is based on 28x Dec-26E EPS —which is in line with its 5Y average
multiples of 27x (10Y average at 23.5x). Higher earnings resilience and return
ratios, payout yield at ~3.5%, FCF yield at 4%, and industry-leading
execution/quality metrics support valuation.
▪ Key highlights from earnings call: (1) FY25 deal bookings can be closer to the
FY25 mark. (2) Optimism is driven by the work backlog of the customer. (3) Easing
of rate environment, consumer confidence can potentially lead to improved tech
investments. (4) Near-term pressure in Manufacturing vertical with labour and
supply side constraints, but strong long-term trends of Smart manufacturing and
software-defined vehicles. (5) Furlough impact is expected to be similar to last
year. (6) Margin exit at 26% - similar to FY24. (7) SG&A leverage is a margin lever
for the company as growth picks up. (8) Profit margin in the growth market is
lower than the major market.
Page | 2
Exhibit 1: Quarterly consolidated Financial Snapshot

Q2 Q2 YoY Q1 QoQ H1 H1 YoY
Particulars (INR bn)
FY25 FY24 (%) FY25 (%) FY25 FY24 (%)
Net Revenues (USD mn) 7,670 7,210 6.4 7,505 2.2 15,175 14,436 5.1
Net Revenues 642.59 596.92 7.7 626.13 2.6 1,268.72 1,190.73 6.5
Employee Expenses 366.54 351.23 4.4 364.16 0.7 730.70 702.71 4.0
Other Operating Expenses 108.74 88.23 23.2 95.35 14.0 204.09 180.58 13.0
EBITDA 167.31 157.46 6.3 166.62 0.4 333.93 307.44 8.6
Depreciation 12.66 12.63 0.2 12.20 3.8 24.86 25.06 (0.8)
EBIT 154.65 144.83 6.8 154.42 0.1 309.07 282.38 9.5
Interest Cost 1.62 1.59 1.9 1.73 (6.4) 3.35 3.22 4.0
Other Income 7.29 10.06 (27.5) 9.62 (24.2) 16.91 24.03 (29.6)
PBT 160.32 153.30 4.6 162.31 (1.2) 322.63 303.19 6.4
Minority Interest 0.46 0.38 21.1 0.65 (29.2) 1.11 0.84 32.1
Tax 40.77 39.50 3.2 41.26 (1.2) 82.03 78.19 4.9
RPAT 119.09 113.42 5.0 120.40 (1.1) 239.49 224.16 6.8
E/o (adj for tax) - - - - -
APAT 119.09 113.42 5.0 120.40 (1.1) 239.49 224.16 6.8
Margin Analysis
MARGIN ANALYSIS
FY25 FY24 (bps) FY25 (bps) FY25 FY24 (bps)
Employee Expenses % Net
57.0 58.8 -180 58.2 -112 57.6 59.0 -142
Revenues
Other Operating Expenses %
16.9 14.8 214 15.2 169 16.1 15.2 92
Net Revenues
EBITDA Margin (%) 26.0 26.4 -34 26.6 -57 26.3 25.8 50
EBIT Margin (%) 24.1 24.3 -20 24.7 -60 24.4 23.7 65
Tax Rate (%) 25.4 25.8 -34 25.4 1 25.4 25.8 -36
APAT Margin (%) 18.5 19.0 -47 19.2 -70 18.9 18.8 5
Page | 3
Exhibit 2: Revenue growth trend improving vs Exhibit 3: Growth recovery expected with stable margin
Accenture (including inorganic) in FY25E
Source: Company, HSIE Research Source: Company, HSIE Research
Exhibit 4: Margin declined -60bps sequentially Exhibit 5: Higher cost of equipment due to BSNL deal
ramp up
Exhibit 6: Scope to normalise employee expense & hardware cost with improvement in pyramid
% of revenue FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 H1FY25
Employee expense 52.2% 53.9% 53.4% 54.8% 55.9% 56.1% 56.6% 58.2% 57.6%
Cost of hardware & software license 2.4% 2.2% 1.5% 1.2% 0.9% 0.6% 0.8% 1.5% 4.2%
Fees to external consultant 7.5% 7.3% 7.7% 8.2% 8.0% 9.1% 9.5% 6.6% 4.5%
Facility expense 3.1% 3.2% 2.9% 1.7% 1.3% 1.1% 1.2% 1.3% 1.3%
Travel expense 2.4% 2.3% 2.4% 2.1% 0.7% 0.8% 1.2% 1.2% 1.3%
Others 5.0% 4.7% 5.0% 5.1% 4.8% 4.6% 4.5% 4.5% 4.7%
Depreciation & Amortisation 1.7% 1.6% 1.4% 2.2% 2.5% 2.4% 2.2% 2.1% 2.0%
EBIT 25.7% 24.8% 25.6% 24.6% 25.9% 25.3% 24.1% 24.6% 24.4%
Page | 4
Exhibit 7: Strong technology partnerships

Salesforce AWS ServiceNow
AWS AWS Adobe certified Google Cloud premier
certified experts Customer certified
certifications Competencies employees partner
(Nos) launches resources
Accenture 25,598 2000+ 31 2000+ 2,850 1,468 Service, Build, Sell
Cognizant 12,205 2000+ 13 500+ 1,791 827 Service, Sell
Capgemini 9,327 2000+ 14 1000+ 874 241 Service, Sell
TCS 8,400 2000+ 18 1000+ 1,094 674 Service, Build, Sell
Infosys 9,392 2000+ 16 400+ 1,986 430 Service, Sell
Wipro 4,986 2000+ 14 200+ 479 82 Service, Sell
HCLT 2,068 2000+ 13 300+ 672 203 Service, Sell
TECHM 2,088 2000+ 10 500+ 341 54 Service, Sell
LTIMindtree 2,213 2000+ 10 400+ 315 123 Sell
Mphasis 623 500+ 6 50+ NA NA
Persistent 2,590 1000+ 6 50+ NA 10 Service, Sell
EPAM 1,596 2000+ 7 500+ 57 166 Service, Sell
Exhibit 8: High credentials in Microsoft ecosystem

Microsoft Products Partner expertise TCS Infosys Wipro HCL Tech Tech Mahindra LTIM
Azure Y Y Y Y Y Y
Developer tools Y Y Y
Dynamics 365 Y Y Y Y
Dynamics 365 Enterprise Y Y Y Y Y Y
DynamicsAX,GP,NAV,SL Y Y Y Y Y
Enterprise Mobility & Security Y Y Y Y Y Y
Exchange Y Y Y Y
Microsoft 365 Y Y Y Y Y
Office 365 Y Y Y Y Y Y
Power BI Y Y Y Y Y Y
Project Y Y Y
SQL Y Y Y
Sharepoint Y Y Y Y Y Y
Skype for business Y Y Y Y
Teams Y Y Y Y Y
Visio Y Y
Windows Y Y Y Y
Yammer Y
Exhibit 9: Number of GenAI POCs engagements
Page | 5
Exhibit 10: Improving trend of USD 100mn+ clients Exhibit 11: Growth across client bucket
Exhibit 12: Steady DSO Exhibit 13: Stable OCF/FCF generation
Exhibit 14: Strong payout policy reflected in consistent buyback history

1st Buyback 2nd Buyback 3rd Buyback 4th Buyback 5th Buyback
Date of announcement Feb-17 Jun-18 Oct-20 Jan-22 Oct-23
Buyback end date May-17 Sep-18 Jan-21 Mar-22 Dec-23
Buyback size (INR bn) 160 160 160 180 170
Buyback shares (mn) 56 76 53 40 41
% of total shares 3.0 2.0 1.4 1.1 1.1
Buyback Price (INR) 2,850 2,100 3,000 4,500 4,150
Page | 6
Exhibit 15: Deal wins in CY24

Enterprise Client Vertical Geography Service
Regional Markets &
Sydney Marathon Australia Advanced technologies deal for 5 year
Others
ASDA Retail & CPG UK IT Infrastructure service
Banco de Crédito del Perú BFSI US IT transformation (AI.Cloud modernisation)
Qantas Retail & CPG Australia Automation leveraging the emerging AI technologies
Openreach Communication & Media UK Roll-out of next-gen fibre networks (GenAI and cloud-led innovations)
McDonald’s Retail & CPG Philippines IT Modernisation
Mansfield Building Society BFSI UK Digital banking solutions
Primark Retail & CPG Europe Technology transformation deal for 5 year
Croma Retail & CPG India Omnistore
Regional Markets &
Follett Higher Education US Cloud-Based IT Infrastructure & Cyber security (3 year)
Others
Rolls-Royce Manufacturing UK Engineering service for Hydrogen fuel
Regional Markets &
Belgium Post Europe Front office transformation
Others
JLR Manufacturing UK SAP service
Regional Markets &
NA US Infrastructure Managed Services
Others
NA Retail & CPG US Transformation - AI
Xerox Technology & Services US Migration to Azure public cloud
Burgan Bank BFSI Kuwait Core banking modernisation
easyJet Retail & CPG Europe IT operations transformation
AkzoNobel Retail & CPG Netherlands GenAI and automation
Ontario Teachers' Pension BFSI US Service transformation
Toyota Motor North America Manufacturing US IT infrastructure, supplier consolidation
Euroclear BFSI Finland Platform integration
Central Bank in US BFSI US Core modernisation
Regional Markets &
Ramboll Denmark IT Infra transformation
Others
Nuuday Communication & Media Denmark Migration to hybrid cloud
The Co-operative Group
Retail & CPG UK Enterprise Cloud transformation
Limited
Enento Group Technology & Services Finland IT applications, cloud, digital workplace, and IT security transformation
Europ Assistance BFSI France TCS Ignio AIOps (end-to-end enterprise IT apps)
(USD 2bn+ TCV est.) End-to-end policy administration and servicing of
Aviva BFSI UK
5.5mn policies
Exhibit 16: Deal TCV trend
Page | 7
Exhibit 17: TCS - Performance by Verticals

Vertical Revenue Mix (%) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
BFSI 32.9 32.5 32.6 31.7 31.3 30.9 30.8
Consumer Business 16.0 16.1 15.9 15.7 15.7 15.4 15.1
Communication & Media 7.1 7.0 6.9 6.7 6.6 6.2 5.9
Manufacturing 8.2 8.3 8.5 8.6 8.8 8.8 8.6
Life Sciences & Healthcare 10.9 11.0 10.9 10.9 10.9 11.0 10.4
Energy & Utilities 5.4 5.5 5.6 5.7 5.6 5.6 5.7
Technology & Services 8.9 8.7 8.6 8.4 8.2 8.1 8.0
Regional Markets & Others 10.6 10.9 11.0 12.3 12.9 14.0 15.5
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0
(QoQ Growth, %) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

BFSI 1.1 (0.8) 0.1 (1.8) (0.1) 0.6 1.9
Consumer Business 1.7 1.1 (1.5) (0.3) 1.1 (0.0) 0.2
Communication & Media 0.3 (1.0) (1.6) (1.9) (0.4) (4.2) (2.7)
Manufacturing 1.7 1.7 2.2 2.2 3.5 1.9 (0.1)
Life Sciences & Healthcare 2.6 1.4 (1.1) 1.0 1.1 2.9 (3.4)
Energy & Utilities 5.6 2.3 1.6 2.8 (0.6) 1.9 4.0
Technology & Services 0.6 (1.8) (1.4) (1.4) (1.3) 0.7 0.9
Total 1.7 0.4 (0.2) 1.0 1.1 1.9 2.2
(YoY Growth, % CC) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
BFSI 9.1 3.0 (0.5) (3.0) (3.2) (0.9) 0.1
Consumer Business 13.0 5.3 1.0 (0.3) (0.3) (0.3) 0.1
Communication & Media 5.3 0.5 (2.1) (4.9) (5.5) (7.4) (10.3)
Manufacturing 9.1 9.4 5.8 7.0 9.7 9.4 5.3
Life Sciences & Healthcare 12.3 10.1 5.0 3.1 1.7 4.0 0.1
Energy & Utilities NA NA 14.8 11.8 7.3 5.7 7.0
Technology & Services 9.2 4.4 (2.2) (5.0) (5.6) (3.9) (1.9)
Total 10.7 7.0 2.8 1.7 2.2 4.4 5.5
Exhibit 18: TCS - Performance by Geographies

Geography Revenue Mix (%) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
North America 52.4 52.0 51.7 50.6 50.0 49.5 47.6
Latin America 1.8 2.0 2.0 2.1 2.0 1.9 1.8
UK 15.7 16.4 16.5 16.4 16.8 16.9 17.0
Continental Europe 15.1 14.9 14.9 15.0 14.6 14.4 14.6
Asia-Pacific 8.0 7.8 7.8 7.8 7.8 7.8 8.0
India 5.0 4.9 4.9 6.1 6.7 7.5 8.9
Middle East and Africa 2.0 2.0 2.2 2.0 2.1 2.0 2.1
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Page | 8
(QoQ Growth, %) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

North America (0.8) (0.3) (0.8) (1.2) (0.1) 0.9 (1.7)
Latin America 1.7 11.6 (0.2) 6.0 (3.7) (3.2) (3.2)
UK 7.2 4.9 0.4 0.4 3.6 2.5 2.8
Continental Europe 3.8 (0.9) (0.2) 1.7 (1.6) 0.5 3.6
Asia-Pacific 3.0 (2.1) (0.2) 1.0 1.1 1.9 4.8
India (0.3) (1.6) (0.2) 25.7 11.1 14.1 21.3
Middle East and Africa 13.0 0.4 9.8 (8.2) 6.2 (2.9) 7.3
Total 1.7 0.4 (0.2) 1.0 1.1 1.9 2.2
(YoY Growth, % CC) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
North America 9.6 4.6 0.1 (3.0) (2.3) (1.1) (2.1)
Latin America 15.1 13.5 13.1 13.2 9.8 6.3 6.8
UK 17.0 16.1 10.7 8.1 6.2 6.0 4.6
Continental Europe 8.4 3.4 1.3 0.5 (2.0) 0.9 1.8
Asia-Pacific 7.5 4.7 4.1 3.9 5.2 7.6 7.5
India 13.4 14.0 3.9 23.4 37.9 61.8 95.2
Middle East and Africa 11.3 15.2 15.9 16.0 10.7 8.5 7.9
Total 10.7 7.0 2.8 1.7 2.2 4.4 5.5
Exhibit 19: TCS - Client Metrics

(Nos) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
>USD 1mn clients 1,241 1,268 1,272 1,288 1,294 1,310 1,307
>USD 5mn clients 665 677 688 693 693 697 710
>USD 10mn clients 461 468 483 480 487 486 491
>USD 20mn clients 291 296 292 299 301 300 298
>USD 50mn clients 133 137 137 137 139 140 136
>USD 100mn clients 60 60 61 61 62 63 66
Exhibit 20: TCS - Employee Metrics

(Nos.) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
Total headcount 6,14,795 6,15,318 6,08,985 6,03,305 6,01,546 6,06,998 6,12,724
Net additions 821 523 -6,333 -5,680 -1,759 5,452 5,726
IT services LTM attrition (%) 20.1 17.8 14.9 13.3 12.5 12.1 12.3
Page | 9
Exhibit 21: Change in estimates

FY25E FY25E Change FY26E FY26E Change FY27E FY27E Change
YE March (INR bn)
Old Revised % Old Revised % Old Revised %
Revenue (USD mn) 30,661 30,804 0.5 32,633 32,814 0.6 35,220 35,401 0.5
Revenue 2,569.36 2,581.58 0.5 2,773.85 2,789.16 0.6 3,028.93 3,044.48 0.5
EBIT 650.35 640.67 (1.5) 722.20 724.34 0.3 786.72 792.48 0.7
EBIT margin (%) 25.3 24.8 -49bps 26.0 26.0 -7bps 26.0 26.0 6bps
APAT 508.91 498.28 (2.1) 563.61 562.24 (0.2) 613.58 613.87 0.0
EPS (INR) 140.7 137.7 (2.1) 155.8 155.4 (0.2) 169.6 169.7 0.0
Exhibit 22: TCS P/E (1-yr fwd) Trend Exhibit 23: TCS trading at ~4% discount to NIFTY IT (vs
historical premium ~15%)
P/E (1-yr fwd) 10 Yr Mean NIFTY NSEIT TCS
SD 1SD + 38.0
1SD - 2SD +
40 33.0
35 28.3
28.0
P/E (x)
30
23.0
P/E (x)
25
18.0
20
15 13.0
10 8.0 Apr-15
Apr-16
Apr-18
Apr-20
Apr-22
Apr-17
Apr-19
Apr-21
Apr-23
Apr-24
Apr-15
Apr-17
Apr-18
Apr-20
Apr-21
Apr-24
Apr-16
Apr-19
Apr-22
Apr-23
Oct-16
Oct-17
Oct-18
Oct-19
Oct-21
Oct-23
Oct-24
Oct-15
Oct-17
Oct-18
Oct-19
Oct-20
Oct-21
Oct-22
Oct-24
Oct-15
Oct-20
Oct-22
Oct-16
Oct-23
Source: Bloomberg, HSIE Research Source: Bloomberg, HSIE Research
Exhibit 24: Earnings resilience relative to peers Exhibit 25: Superior execution will support premium
valuations
TCS Infosys
Wipro HCL Tech 26.0 24.9
105
FY26E Consensus EPS (INR)
23.4 23.0
24.0 22.6
100 22.0
FY27E P/E (x)
19.3
95 20.0
18.0
90
16.0
85
14.0
80
12.0
Apr-23
Apr-24
Jun-23
Jun-24
Feb-24
Mar-24
Jul-23
Jan-24
Sep-23
Oct-23
Jul-24
Sep-24
May-23
May-24
Aug-23
Nov-23
Aug-24
Dec-23
10.0
TCS Infosys Wipro HCL Tech Accenture
Source: Bloomberg, HSIE Research Source: HSIE Research, Note: Accenture is Bloomberg consensus P/E
Page | 10
Financials
Consolidated Income Statement
YE March (INR bn) FY23 FY24 FY25E FY26E FY27E
Net Sales (USD mn) 27,927 29,080 30,804 32,814 35,401
Growth (%) 8.6 4.1 5.9 6.5 7.9
Net Sales 2,254.58 2,408.93 2,581.58 2,789.16 3,044.48
Growth (%) 17.6 6.8 7.2 8.0 9.2
Employee Expenses 1,275.22 1,401.31 1,475.19 1,593.49 1,737.54
SG&A and Other Expenses 386.77 364.66 414.09 415.54 453.58
EBIDTA 592.59 642.96 692.30 780.13 853.36
Depreciation 50.22 49.85 51.63 55.78 60.89
EBIT 542.37 593.11 640.67 724.34 792.48
EBIT (%) 24.1 24.6 24.8 26.0 26.0
EBIT Growth (%) 11.9 9.4 8.0 13.1 9.4
Other Income 34.49 44.22 38.69 42.61 44.04
Interest 7.79 7.78 8.03 9.35 9.35
PBT 569.07 629.55 671.34 757.61 827.16
Tax (incl deferred) 146.04 158.98 170.95 193.19 210.93
Minority Interest and associate profit 1.56 1.91 2.11 2.17 2.37
RPAT 421.47 459.08 498.28 562.24 613.87
APAT 421.47 466.35 498.28 562.24 613.87
APAT Growth (%) 10.0 10.6 6.8 12.8 9.2
EPS (INR) 116.5 128.9 137.7 155.4 169.7
EPS Growth (%) 10.0 10.6 6.8 12.8 9.2
Consolidated Balance Sheet

SOURCES OF FUNDS
Share Capital - Equity 3.66 3.62 3.62 3.62 3.62
Reserves 900.58 901.27 921.96 977.67 1,048.82
Total Shareholders' Funds 904.24 904.89 925.58 981.29 1,052.44
Minority Interest 7.82 8.30 9.88 12.05 14.42
Total Debt - - - - -
Net Deferred Taxes (25.15) (24.26) (24.26) (24.26) (24.26)
Long Term Provisions & Others 80.95 80.49 80.49 80.49 80.49
TOTAL SOURCES OF FUNDS 967.86 969.42 991.69 1,049.57 1,123.10
APPLICATION OF FUNDS
Net Block 177.90 172.62 185.76 198.66 211.46
CWIP 12.34 15.64 15.64 15.64 15.64
Goodwill & Other Intangible Assets 27.25 23.42 24.16 24.20 24.27
Investments 2.66 2.81 2.81 2.81 2.81
Other non current assets 79.10 84.86 84.87 84.89 84.90
Total Non Current Assets 299.25 299.35 313.23 326.20 339.08
Cash & Equivalents 487.75 449.37 433.79 449.90 475.11
Debtors 411.98 445.61 477.46 515.75 562.84
Other Current Assets 204.46 236.13 242.68 250.56 260.25
Total Current Assets 1,104.19 1,131.11 1,153.93 1,216.21 1,298.20
Creditors 105.15 99.81 106.96 115.56 126.14
Other Current Liabilities & Provns 330.43 361.23 368.51 377.27 388.05
Total Current Liabilities 435.58 461.04 475.48 492.84 514.19
Net Current Assets 668.61 670.07 678.45 723.37 784.02
TOTAL APPLICATION OF FUNDS 967.86 969.42 991.69 1,049.57 1,123.10
Page | 11
Consolidated Cash Flow

Reported PBT 569.07 629.55 671.34 757.61 827.16
Non-operating & EO items (35.60) (50.09) (28.85) (31.76) (32.83)
Interest expenses 7.79 7.78 8.03 9.35 9.35
Depreciation 50.22 49.85 51.63 55.78 60.89
Working Capital Change (42.17) (68.82) (23.96) (28.81) (35.43)
Tax paid (129.66) (124.89) (170.95) (193.19) (210.93)
OPERATING CASH FLOW 419.65 443.38 507.23 568.98 618.22
Capex (31.00) (26.74) (65.51) (68.73) (73.76)
Free cash flow (FCF) 388.65 416.64 441.73 500.25 544.46
Non-operating income 35.60 50.09 28.84 31.75 32.81
INVESTING CASH FLOW 4.60 23.39 (36.67) (36.98) (40.94)
Interest expenses (7.79) (7.78) (8.03) (9.35) (9.35)
FCFE 380.86 408.86 433.70 490.90 535.11
Dividend/buyback (455.84) (462.23) (477.59) (506.53) (542.71)
FINANCING CASH FLOW (463.63) (470.01) (485.61) (515.89) (552.07)
NET CASH FLOW (39.38) (3.24) (15.05) 16.11 25.21
Closing Cash & Equivalents 487.75 449.37 433.79 449.90 475.11
Key Ratios
FY23 FY24 FY25E FY26E FY27E
PROFITABILITY (%)
EBITDA Margin 26.3 26.7 26.8 28.0 28.0
APAT Margin 18.7 19.4 19.3 20.2 20.2
RoE 46.9 51.6 54.4 59.0 60.4
RoIC or Core RoCE 90.7 88.7 88.6 93.2 94.6
RoCE 44.5 48.7 51.4 55.8 57.1
EFFICIENCY
Tax Rate (%) 25.7 25.3 25.5 25.5 25.5
Fixed Asset Turnover (x) 7.0 7.1 7.2 7.3 7.7
Debtors (days) 67 68 68 67 67
Other Current Asset (days) 33 36 34 33 31
Payables (days) 17 15 15 15 15
Other Current Liab & Prov (days) 53 55 52 49 47
Cash Conversion Cycle (days) 29 33 35 36 37
Net Debt/EBITDA (x) (0.8) (0.7) (0.6) (0.6) (0.6)
Net Debt/Equity (x) (0.5) (0.5) (0.5) (0.5) (0.5)
Interest Coverage (x) 70 76 80 77 85
PER SHARE DATA
EPS (INR/sh) 116.5 128.9 137.7 155.4 169.7
CEPS (INR/sh) 128.9 142.7 152.0 170.8 186.5
DPS (INR/sh) 115.0 73.0 132.0 140.0 150.0
BV (INR/sh) 241 241 247 262 280
VALUATION
P/E 36.3 32.8 30.7 27.2 24.9
P/BV 17.5 17.5 17.1 16.2 15.1
EV/EBITDA 25.0 23.1 21.5 19.0 17.4
OCF/EV (%) 3.0 3.2 3.6 4.0 4.4
FCF/EV (%) 2.8 2.9 3.6 4.0 4.4
FCFE/mkt cap (%) 2.6 2.8 3.4 3.8 4.2
Dividend Yield (%) 2.7 1.7 3.1 3.3 3.5
Page | 12
1 Yr Price Movement
TCS
4800
4600
4400
4200
4000
3800
3600
3400
Rating Criteria
3200
BUY: >+15% return potential
3000
ADD: +5% to +15% return potential
Nov-23
Apr-24
Mar-24
Dec-23
Jan-24
Feb-24
May-24
Aug-24
Sep-24
Oct-23
Jun-24
Oct-24
Jul-24
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential
Page | 13
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Page | 15
11 October 2024 Results Review Q2FY25
Tata Elxsi
Mixed vertical trends REDUCE
Tata Elxsi’s (TELX) performance continued to exhibit a similar trend of strength
CMP (as on 10 Oct 2024) INR 7,759
in the Transportation vertical (56% of revenue), offset by weakness in the
Target Price INR 6,925
Media & Communications vertical and the Healthcare vertical. Growth in T5
declined sequentially, a first in three years. Deal momentum in Transportation NIFTY 24,998
(incl. USD 50mn TCV deal) and an increased mix of OEMs can maintain the
growth outperformance. While the Healthcare vertical can recover by FY25E- KEY
OLD NEW
end, Media & Communications could take longer. We continue to believe that CHANGES
T1 client growth momentum and OEM sub-segment within the Transportation Rating REDUCE REDUCE
segment will drive the bulk of the growth over FY24-26E. While the growth Price Target INR 7,120 INR 6,925
trajectory is expected to improve ahead, valuations are still a stretch; maintain
FY26E FY27E
REDUCE with a TP of INR 6,925, based on 38x Dec-26E EPS. EPS %
-2.6 -2.8
▪ Transportation vertical robust performance: TELX’s Transportation vertical
continues to post strong growth supported by an increasing mix of OEM
within the vertical – in Q2 OEM’s share of revenue stood at 68%. Growth in KEY STOCK DATA
the vertical is supported by TELX’s capabilities in software-defined vehicles, Bloomberg code TELX IN
ADAS and Connected. TELX is now embedded in the SDV programs of five
No. of Shares (mn) 62
global OEMs and has worked with over 30 OEMs globally. The key deal win
included USD 50mn TCV from European OEM for software-defined and MCap (INR bn) / ($ mn) 483/5,754
other components of automotive engineering. TELX’s deal wins in the vertical 6m avg traded value (INR mn) 1,926
are likely to support continued growth momentum in the vertical – we’re 52 Week high / low INR 9,200/6,407
factoring 20% growth CAGR for the Transportation vertical in FY25E and
FY26E led by growth in JLR and OEM portfolio while the tier-1 sub-segment
is estimated to decline 5% in FY25E. Within geos, growth in Q2 was largely STOCK PERFORMANCE (%)
driven by India/RoW regions. 3M 6M 12M
▪ Weakness in Media & Communications vertical persists: Media & Absolute (%) 9.0 (1.1) 5.4
Communications vertical performance was weaker than expected at -2.6%
Relative (%) 6.9 (9.9) (18.1)
QoQ CC and was impacted by delays and industry-related factors of lower
subscriber growth and cutback in discretionary. TELX’s media &
communication vertical (32% of revenue) has been underperforming, SHAREHOLDING PATTERN (%)
following a strong FY20-22 and later, a weak FY22-24. Within the vertical, the Mar-24 Jun-24
mix of customers has improved with operators accounting for >70% of
Promoters 43.92 43.92
revenue, but challenges in the industry persist. Key win in the vertical
included the setup of AI CoE for AI-led transformation for a Middle-east FIs & Local MFs 6.06 6.24
operator. TELX’s media & communication portfolio has seen a shift over the FPIs 14.56 13.67
years from having a high share of device vendors earlier to now a higher share Public & Others 35.46 36.17
from operators. TELX has strong partnerships and competencies in areas of
Pledged Shares 0.00 0.00
RDK and Android TV supporting areas of nex-gen entertainment, broadband
and connectivity along with its IP portfolio. We’ve factored the vertical to Source: BSE
decline by 2% for FY25E and recover to double-digit subsequently.
Apurva Prasad
Financial Summary [email protected]
YE March (INR bn) Q2FY25 Q2FY24 YoY (%) Q1FY25 QoQ (%) FY24 FY25E FY26E FY27E
+91-22-6171-7327
Revenue (USD Mn) 114 107 6.8 111 2.6 429 466 540 622
Net Sales 9.55 8.82 8.3 9.26 3.1 35.52 39.08 45.89 53.48 Amit Chandra
EBIT 2.39 2.39 0.3 2.25 6.2 9.47 10.23 12.44 14.59 [email protected]
APAT 2.29 2.00 14.7 1.84 24.6 7.92 8.60 10.11 11.79 +91-22-6171-7345
Diluted EPS (INR) 36.8 32.1 14.7 29.6 24.6 127.2 138.1 162.4 189.4
P/E (x) 61.0 56.2 47.8 41.0 Vinesh Vala
EV / EBITDA (x) 44.7 41.0 33.7 28.6 [email protected]
RoE (%) 34.5 31.9 32.4 32.6 +91-22-6171-7332
Tata Elxsi: Results Review Q2FY25
Healthcare & Life-sciences vertical recovery expected by end-FY25E: Healthcare &

Life-sciences vertical drop in revenue was deeper than expected on account of delay in
renewal and starting some new programs with the company’s leading US-based
customers. Key new logo wins in the vertical include deals from a global renal care
company, US-based healthtech AI and a strategic partnership with Skanray (global
Medtech) for advanced surgical imaging core technology and software platform
development. Historically, the vertical has been a slow adopter of digital tech and
recent volatility was owing to changes in regulatory timelines that impacted regulatory
and compliance work done by TELX.
Margin impacted by wage hike: TELX posted a margin of 27.9% EBITDAM, +66bps
QoQ. Sequential improvement in EBITM supported by cross currency impact
(+160bps), lower other expenses (+130bps); partially offset by wage hike (-120bps). The
wage hike of junior staff (70% of the workforce) in Q2 will be followed by a margin
headwind in Q3 from the senior workforce wage hike -offsets include utilisation which
has a 5-10pp scope for improvement. Higher other income was driven by INR 0.28bn
interest on tax refund and R&D credits. APAT came in at INR 2.29bn, up 14.7%,
supported by higher other income. Headcount dropped 1.3% in the absence of fresher
adds in Q2 to a total headcount of <13k with steady attrition at 12.5%.
Outlook and valuation: We expect the Transportation vertical to continue to drive
growth in FY25E and FY26E while the Media & Communications vertical and
Healthcare & Lifesciences are expected to recover in FY26E. The rate of recovery in the
non-Transportation segment will determine the trajectory in valuation multiples,
following its de-rating over the past two years. Expect 14% EPS CAGR over FY24-27E.
Maintain REDUCE on TELX with a TP of INR 6,925, based on 38x Dec-26E EPS. TELX
is trading at 48x FY26E and 41x FY27E.
Highlights from earnings call: (1) The Transportation business remains a key growth
driver for the company attributed to its strong capabilities in ADAS, Connected,
Electric and Software Defined Vehicle technologies, leading to significant deals with
global OEMs. (2) The company secured a multi-year deal of USD 50mn from a
European global OEM, encompassing SDV and various automotive engineering
domains. (3) Despite challenges in the automotive industry, TELX is confident in its
growth trajectory for H2. (4) The decline in Media & Communications was due to
delayed customer decisions on large deals and the completion of existing projects.
However, the company sees potential growth opportunities in network transformation
offerings and digital gen-AI-led innovations in media. (5) Management expects a
recovery in the Healthcare and Lifesciences business in Q3 (bottomed out in Q2), with
existing customer programs restarting and new client acquisitions expected to
contribute to growth. (6) The company has a strategic focus on expanding in Japan,
emerging markets, and India. (7) The company’s focus for headcount growth is shifting
towards specialized skills required for specific projects and it has reduced lateral
hiring. TELX will onboard freshers from previous campus recruitments in Q3 and Q4.
(8) The company intends to end with double-digit CC growth in FY25 supported by
the current deal wins.
Page | 2
Exhibit 1: Quarterly Financial Snapshot

Particulars (INR bn)
FY25 FY24 (%) FY25 (%) FY25 FY24 (%)
Net Revenues (USD mn) 114 107 6.8 111 2.6 225 210 7.1
Net Revenues 9.55 8.82 8.3 9.26 3.1 18.82 17.32 8.6
Employee benefit
5.15 4.77 7.9 4.99 3.3 10.14 9.20 10.2
expense
Gross Profit 4.40 4.04 8.8 4.28 2.8 8.68 8.12 6.9
Other Expenses 1.74 1.41 23.3 1.76 (1.2) 3.49 2.97 17.5
EBITDA 2.66 2.64 1.1 2.52 5.6 5.19 5.15 0.7
Depreciation 0.27 0.25 8.6 0.27 0.3 0.54 0.46 16.8
EBIT 2.39 2.39 0.3 2.25 6.2 4.64 4.69 (0.9)
Other Income 0.64 0.31 106.6 0.32 100.4 0.96 0.53 80.7
Interest expense 0.05 0.06 (16.6) 0.05 (1.0) 0.10 0.10 0.0
PBT 2.99 2.64 13.2 2.52 18.3 5.51 5.12 7.6
Tax 0.69 0.64 8.5 0.68 1.4 1.38 1.23 11.6
APAT 2.29 2.00 14.7 1.84 24.6 4.14 3.89 6.3
Sequential E/o (adj for tax) - - - - -
improvement in EBITM
RPAT 2.29 2.00 14.7 1.84 24.6 4.14 3.89 6.3
supported by cross
currency impact
(+160bps), lower other Margin Analysis
expenses (+130bps); Q2 Q2 YoY Q1 QoQ H1 H1 YoY
MARGIN ANALYSIS
partially offset by FY25 FY24 (bps) FY25 (bps) FY25 FY24 (%)
Employee expense % Net
wage hike (-120bps) 53.9 54.1 -21 53.8 12 53.9 53.1 77
Revenues
Gross Profit Margin (%) 46.1 45.9 21 46.2 -12 46.1 46.9 -77
Other Expenses % Net
18.2 16.0 221 19.0 -78 18.6 17.2 140
Revenues
EBITDA Margin (%) 27.9 29.9 -200 27.2 66 27.6 29.7 -217
EBIT Margin (%) 25.1 27.1 -200 24.3 74 24.7 27.1 -237
Tax Rate (%) 23.2 24.2 -100 27.1 -388 25.0 24.1 89
APAT Margin (%) 24.0 22.7 134 19.9 415 22.0 22.5 -48
Page | 3
Exhibit 2: Key deal wins in CY24

Vertical Geography Service
Transportation Europe SDV Platform development (USD 50mn for 5 year)
Healthcare & Medical Devices NA AI powered solutions
Healthcare & Medical Devices NA Next Gen Digital platform (leveraging data & AI)
Broadcast & Communications Middle East AI & GenAI led transformation
Broadcast & Communications US Multi-million USD Design Digital deal
Healthcare & Medical Devices
India AI and GenAI
(Skanray)
Transportation (Nidec) Japan Software development
Healthcare & Medical Devices NA Cloud based connected care system (Multi Year)
Healthcare & Medical Devices NA GenAI based solution
Broadcast & Communications US Network transformation and automation
Transportation Japan Strategic innovation and development
Software Development, Advanced Simulation and Digital Twin programs (Multi
Transportation NA
Million)
Healthcare & Medical Devices NA Offshore Development Center
Broadcast & Communications NA Design Digital deal (Multi million & Multi Year)
Healthcare & Medical Devices NA Regulatory transformation program leveraging automation and AI (Multi Year)
Transportation US System development using advanced AI/ML algorithms
Software development across multiple domains (e-cockpit, base software, connectivity
Transportation NA
and ADAS)
Broadcast & Communications
Spain Cloud-Native Infrastructure Management
(Telefonica)
Broadcast & Communications
US Cloud native security solution
(AccuKnox)
Healthcare & Medical Devices NA AI technology and algorithms
Broadcast & Communications US Product Engineering with automation and AI services (Large Deal)
Transportation Japan Product Engineering for connected infotainment and digital cockpit (Multi Year)
Transportation APAC Design Digital & Modular design architecture
Page | 4
Exhibit 3: Revenue growth remains cyclical
Exhibit 4: New segmental structure (SDS) Exhibit 5: EPD & IDV combined to drive larger
programs
Q2FY25 FY24
QoQ %, YoY %, YoY %,
(Revenue (Revenue
CC CC CC
USD mn) USD mn)
Transportation - SDS 61.6 4.4 16.0 207.9 20.4
Media &
35.2 (2.6) (5.1) 147.1 -2.6
Communications - SDS
Healthcare& Life
12.7 (11.2) (11.8) 58.3 7.6
Sciences - SDS
Others -SDS 1.1 33.0 35.9 3.3 2.9
Total Software
Development & 110.7 0.2 4.8 416.7 9.3
Services (SDS)
System Integration &
3.3 (1.2) 15.2 12.0 18.6
Support (SIS)
Total Revenue 114.0 0.2 5.1 428.7 9.6
Source: Company, HSIE Research, Note SDS denotes Software Source: Company, HSIE Research
Development & Services (erstwhile EPD+IDV)
Exhibit 6: OEM led growth in Transportation vertical
Page | 5
Exhibit 7: TELX - Performance by geography

% of revenue Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
Europe 37.5 40.0 40.5 40.4 42.2 42.7
USA 40.3 39.6 37.4 36.1 33.7 30.3
India 17.0 15.5 16.4 17.3 17.6 18.8
RoW 5.3 4.9 5.7 6.3 6.5 8.3
Total 100.0 100.0 100.0 100.0 100.0 100.0
US continues to decline
Growth QoQ % Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
for the 4th consecutive
Europe 7.0 10.2 4.2 -1.3 6.8 3.7
quarter impacted by
USA -1.3 1.5 -2.8 -4.5 -4.5 -7.9
Media &
India -0.3 -5.9 8.9 4.5 3.9 9.6
Communication
RoW -7.3 -4.6 19.7 9.5 5.4 31.0
vertical
Total 1.5 3.2 2.9 -1.0 2.1 2.6
Growth YoY % Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

Europe 26.2 31.5 28.5 21.3 21.0 13.9
USA 4.3 2.7 -3.8 -7.1 -10.1 -18.4
India 4.7 4.7 11.5 6.7 11.2 29.6
RoW -6.7 -10.0 -0.4 15.9 31.7 80.9
Total 10.9 12.1 10.1 6.7 7.4 6.8
Exhibit 8: Client metrics – concentration has increased

Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
Top-5 % of revenue 42.0 44.5 43.8 46.2 47.2 45.1
Top-10 % of revenue 51.9 53.2 52.5 55.9 58.0 55.6
Company plans for
fresher addition in
H2FY25 Exhibit 9: Supply side metrics
(Nos) Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25
Total employees 12,286 12,871 13,221 13,399 13,142 12,973
Net addition (nos) 422 585 350 178 (257) (169)
Attrition (%) 15.6 13.7 12.9 12.4 12.3 12.5%
Page | 6
Exhibit 10: Steady and industry leading margins
Exhibit 11: Steady EBITDA margin supported by lower dependence on sub-contracting & high offshore
Exhibit 12: High fixed price component supporting margin
Page | 7
Exhibit 13: Change in estimates

FY25E FY25E Change FY26E FY26E Change FY27E FY27E Change
YE March (INR bn)
Old Revised % Old Revised % Old Revised %
Revenue (USD mn) 467 466 (0.1) 542 540 (0.4) 624 622 (0.4)
Revenue 39.14 39.08 (0.1) 46.06 45.89 (0.4) 53.67 53.48 (0.4)
EBIT 10.78 10.23 (5.1) 12.80 12.44 (2.8) 15.04 14.59 (3.0)
EBIT margin (%) 27.5 26.2 -137bps 27.8 27.1 -69bps 28.0 27.3 -73bps
APAT 8.67 8.60 (0.8) 10.38 10.11 (2.6) 12.13 11.79 (2.8)
EPS (INR) 139.3 138.1 (0.8) 166.7 162.4 (2.6) 194.8 189.4 (2.8)
Exhibit 14: TELX valuations vs other ER&D peers Exhibit 15: TELX P/E (1-yr fwd) Trend
P/E (1-yr fwd) 10 Yr Mean
SD 1SD +
1SD - 2SD +
100
53.4
75
50
P/E (x)
25
-25
Feb-20
Jun-15
Jun-22
Mar-17
Mar-24
Apr-21
Jan-16
Jul-19
Jan-23
Sep-20
Aug-16
Aug-23
Oct-17
Oct-24
Nov-14
May-18
Nov-21
Dec-18
Source: Bloomberg, HSIE Research Source: Bloomberg, HSIE Research
Exhibit 16: Superior revenue + margin driving valuations
Source: Company, HSIE Research, Note: FY22 included special dividend of INR 24, KPITTECH & TATATECH (Not rated) as per Bloomberg Consensus
Page | 8
Financials
Consolidated Income Statement
Net Revenues (USD mn) 390 429 466 540 622
Growth (%) 17.7 9.9 8.8 15.8 15.2
Net Revenues 31.45 35.52 39.08 45.89 53.48
Growth (%) 27.3 13.0 10.0 17.4 16.5
Employee Expenses 15.98 19.10 20.70 24.13 28.29
SG&A Expenses 5.86 5.96 7.04 8.03 9.09
EBITDA 9.61 10.46 11.34 13.73 16.09
EBITDA Margin (%) 30.6 29.5 29.0 29.9 30.1
EBITDA Growth (%) 25.5 8.9 8.4 21.0 17.2
Depreciation 0.81 0.99 1.11 1.28 1.50
EBIT 8.80 9.47 10.23 12.44 14.59
Other Income (Including EO Items) 0.74 1.22 1.59 1.42 1.54
Interest 0.16 0.20 0.19 0.19 0.19
PBT 9.38 10.49 11.63 13.67 15.94
Tax (Incl Deferred) 1.82 2.56 3.03 3.55 4.14
RPAT 7.55 7.92 8.60 10.11 11.79
APAT 7.55 7.92 8.60 10.11 11.79
APAT Growth (%) 37.4 4.9 8.6 17.6 16.6
Adjusted EPS (INR) 121.3 127.2 138.1 162.4 189.4
EPS Growth (%) 37.4 4.9 8.6 17.6 16.6
Consolidated Balance Sheet

SOURCES OF FUNDS
Share Capital - Equity 0.62 0.62 0.62 0.62 0.62
Reserves 20.23 24.43 28.31 32.86 38.16
Total Shareholders Funds 20.86 25.06 28.93 33.48 38.79
Total Debt - - - - -
Net Deferred Taxes (0.13) (0.24) (0.24) (0.24) (0.24)
Long Term Provisions & Others 1.99 2.35 2.35 2.35 2.35
TOTAL SOURCES OF FUNDS 22.72 27.17 31.04 35.59 40.90
APPLICATION OF FUNDS
Net Block 3.17 3.83 4.11 4.58 5.10
Goodwill & intangibles 0.16 0.13 0.14 0.16 0.19
Other Non-current assets 0.55 0.76 0.76 0.76 0.76
Total Non-current Assets 3.95 4.74 5.03 5.53 6.07
Debtors 9.76 9.72 10.69 12.55 14.63
Other Current Assets 1.45 2.07 2.27 2.66 3.10
Cash & Equivalents 12.34 15.09 17.84 20.31 23.31
Total Current Assets 23.55 26.89 30.82 35.54 41.05
Creditors 1.03 0.86 0.94 1.11 1.29
Other Current Liabilities & Prov. 3.75 3.60 3.87 4.37 4.93
Total Current Liabilities 4.79 4.46 4.81 5.48 6.22
Net Current Assets 18.77 22.43 26.01 30.07 34.83
TOTAL APPLICATION OF FUNDS 22.72 27.17 31.04 35.59 40.90
Page | 9
Consolidated Cash Flow

Reported PBT 9.38 10.49 11.63 13.67 15.94
Non-operating & EO items (0.54) (0.74) (1.59) (1.42) (1.54)
Interest expenses 0.16 0.20 0.19 0.19 0.19
Depreciation 0.81 0.99 1.11 1.28 1.50
Working Capital Change (3.10) (1.35) (0.83) (1.59) (1.77)
Tax Paid (1.85) (2.58) (3.03) (3.55) (4.14)
OPERATING CASH FLOW 4.87 7.01 7.48 8.59 10.18
Capex (0.64) (0.83) (1.40) (1.78) (2.04)
Free cash flow (FCF) 4.23 6.18 6.08 6.81 8.14
INVESTING CASH FLOW (2.02) (2.70) 0.19 (0.36) (0.50)
Interest Expenses (0.16) (0.20) (0.19) (0.19) (0.19)
FCFE 4.07 5.98 5.89 6.62 7.94
Dividend (2.65) (3.78) (4.73) (5.56) (6.49)
FINANCING CASH FLOW (2.81) (3.98) (4.93) (5.76) (6.68)
NET CASH FLOW 0.03 0.33 2.75 2.47 3.00
Closing Cash & Equivalents 12.34 15.09 17.84 20.31 23.31
Key Ratios
FY23 FY24 FY25E FY26E FY27E
PROFITABILITY (%)
GPM 49.2 46.2 47.0 47.4 47.1
EBITDA Margin 30.6 29.5 29.0 29.9 30.1
APAT Margin 24.0 22.3 22.0 22.0 22.1
RoE 41.0 34.5 31.9 32.4 32.6
RoIC (or Core RoCE) 83.0 63.7 59.9 64.7 65.7
RoCE 38.2 32.4 30.0 30.8 31.2
EFFICIENCY
Tax Rate (%) 19.4 24.5 26.0 26.0 26.0
Fixed Asset Turnover (x) 8.4 8.8 8.8 8.8 8.8
Debtors (days) 113 100 100 100 100
Other Current Assets (days) 17 21 21 21 21
Payables (days) 12 9 9 9 9
Other Current Liab & Provns (days) 44 37 36 35 34
Cash Conversion Cycle (days) 75 75 76 78 79
Debt/EBITDA (x) - - - - -
Net D/E (x) (0.6) (0.6) (0.6) (0.6) (0.6)
Interest Coverage (x) 54 47 53 64 75
PER SHARE DATA (INR)
EPS 121.3 127.2 138.1 162.4 189.4
CEPS 134 143 156 183 213
Dividend 61 70 76 89 104
Book Value 335 402 465 538 623
VALUATION
P/E (x) 64.0 61.0 56.2 47.8 41.0
P/BV (x) 23.2 19.3 16.7 14.4 12.5
EV/EBITDA (x) 49.0 44.7 41.0 33.7 28.6
OCF/EV (%) 1.0 1.5 1.6 1.9 2.2
FCF/EV (%) 0.9 1.3 1.3 1.5 1.8
FCFE/Mkt Cap (%) 0.8 1.2 1.2 1.4 1.6
Dividend Yield (%) 0.8 0.9 1.0 1.2 1.3
Page | 10
1 Yr Price Movement
Tata Elxsi
9500
9000
8500
8000
7500
7000
6500 Rating Criteria
6000 BUY: >+15% return potential
Sep-24
Jan-24
Feb-24
Mar-24
Apr-24
May-24
ADD: +5% to +15% return potential

Dec-23
Aug-24
Jul-24
Oct-23
Nov-23
Oct-24
Jun-24

SELL: > 10% Downside return potential
Page | 11
Disclosure:
We, Apurva Prasad, MBA, Amit Chandra, MBA & Vinesh Vala, MBA authors and the names subscribed to this report,
hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s)
or securities. SEBI conducted the inspection and based on their observations have issued advise/warning. The said
observations have been complied with. I also certify that no part of my compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report.
more in the subject company at the end of the month immediately preceding the date of publication of the Research
Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does have/does not have any
material conflict of interest.
Any holding in stock – No
Disclaimer:
the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional
advice before investing. Nothing in this document should be construed as investment advice. Each recipient of this
document should make such investigations as they deem necessary to arrive at an independent evaluation of an
investment in securities of the companies referred to in this document (including merits and risks) and should consult
their own advisors to determine merits and risks of such investment. The information and opinions contained herein have
been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such
information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice.
Descriptions of any company or companies or their securities mentioned herein are not intended to be complete. HSL is
not obliged to update this report for such changes. HSL has the right to make changes and modifications at any time.
have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such
as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be
sustained due to the investments made or any action taken on basis of this report, including but not restricted to,
fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc.
Page | 12
securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities
from time to time or may deal in other securities of the companies / organizations described in this report. As regards the
HSL or its associates might have received any compensation from the companies mentioned in the report during the
period preceding twelve months from the date of this report for services in respect of managing or co-managing public
offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a
merger or specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or
third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have
any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not
based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued
other reports that are inconsistent with and reach different conclusion from the information presented in this report.
investing.
HDFC Securities
Page | 13
10 October 2024 Q2FY25 Results Preview
Consumer Durables & EMS

Soft quarter; festive season a key monitorable HSIE Universe
With Q2 being seasonally the weakest quarter, the demand environment CMP* TP
Companies Rating
remained impeded by weak consumer sentiment due to inflationary pressures. (INR) (INR)
As channel inventory ran dry post a sizzling summer season, primary sales of Consumer Durables
cooling products (more so RAC and air coolers) are likely to support overall Bajaj Electricals 902 1,200 BUY
industry growth. While Onam demand (start of the festive season) was below Crompton
438 500 BUY
expectation, early trends from Navratri/Dusshera have been encouraging. Consumer
Sustenance of demand pick-up during the festive season remains a key Havells 1,929 2,000 ADD
monitorable. We expect our consumer durable universe to register a Orient

236 300 BUY
Electric
revenue/EBITDA/PAT growth of 11/29/40% YoY (10/14/13% two-year CAGR).
Symphony 1,797 1,350 REDUCE
Within EMS, industry tailwinds will continue to support accelerated growth
momentum. We expect our EMS universe revenue to grow 76% YoY. However, TTK Prestige 877 775 REDUCE
increasing mix in favour of high-volume low-margin business will lead to a dip V-Guard 440 420 REDUCE
in margins over LY, leading to EBITDA/PAT growth of 61/82%. Voltas 1,792 1,775 ADD
▪ Soft demand in a seasonally weak quarter: Q2 is seasonally the weakest EMS

quarter for most consumer durable categories. In tune with earlier quarters, Amber
5,131 5,600 BUY
Enterprises
there is only a gradual improvement in consumer sentiment (more so in mass
Dixon
segments). Moreover, given monsoons, there is also some slowdown in the 14,750 12,000 REDUCE
Technologies
execution of B2B projects where tendering of new projects is yet to see any Kaynes
5,392 4,500 REDUCE
meaningful pick-up post elections. Against this backdrop, we expect our Technology
consumer durable universe to exhibit revenue/EBITDA/PAT growth of Syrma SGS 409 600 BUY
* CMP as on 9th October 2024
11/29/40% (10/14/13% two-year CAGR).
▪ Summer portfolio seeing some channel filling; kitchen demand pangs
persist: With channel inventory running dry for cooling products (more so Top picks
RAC and air coolers) post a sizzling summer season, these products are Consumer Durables:
witnessing some channel filling which is supporting the overall industry ▪ Bajaj Electricals
▪ Crompton Consumer
growth. We expect the RAC industry to have grown in healthy double digits
▪ Orient Electric
while fans would have likely grown in MSD-HSD. Kitchen appliances
demand continues to be soft while B2C lighting continues to see price erosion. EMS:
An increase in copper prices in September (post three consecutive months of ▪ Amber Enterprises
decline) is likely to have aided some channel filling which is expected to
support wires & cables volumes during the quarter.
▪ Onam soft, all eyes on the festival season: Onam demand (start of the festive
season) has been below expectations. However, early trends from
Navratri/Dusshera have been encouraging. Pick-up in demand during the
festive season remains a key monitorable going ahead.
▪ Key input prices soften QoQ: Post a sharp uptick seen in 1Q, prices of input
materials saw some softening during 2Q (however, still up YoY). LME spot
copper prices grew 11% YoY (-5% QoQ) while average LME aluminum spot
prices rose by 12% YoY (-5% QoQ).
▪ Electronics Manufacturing Services (EMS): We expect the EMS industry to
sustain its accelerated growth momentum, led by (1) a populous base and
rising aspiration levels ensuring large captive electronics demand; (2) low per
capita electronics consumption (a quarter of the global average); and (3)
government’s push for making India a global hub for electronics
manufacturing. We expect our EMS universe to post revenue/EBITDA/PAT
growth of 76/61/82% (51/45/55% two-year CAGR). Increasing mix in favour of
Paarth Gala
high-volume low-margin business will lead to a dip in margins over LY.
[email protected]
Please find included (exhibit 2) changes in our coverage universe for estimates, +91-22-6171-7336
target multiples, changes in target prices, and ratings. We roll forward our TP
to Sep’26 EPS for our consumer durable and EMS universe.
Consumer Durables & EMS: Q2FY25 Results Preview
Exhibit 1: Q2FY25 Quarterly Estimates Snapshot

NET SALES (INR bn) EBITDA (INR bn) EBITDA Margin (%) APAT (INR bn) Adj. EPS (INR)
Companies Q2 QoQ YoY Q2 QoQ YoY Q2 QoQ YoY Q2 QoQ YoY Q2 QoQ YoY
FY25E (%) (%) FY25E (%) (%) FY25E (bps) (bps) FY25E (%) (%) FY25E (%) (%)
Consumer Durables
Bajaj Electricals 11.8 1.8 5.7 0.8 (0.4) (2.1) 6.4 (10.0) (50.0) 0.3 16.3 (13.6) 2.8 16.3 (13.6)
Crompton 19.0 (11.2) 6.5 1.9 (19.2) 7.6 9.9 (100.0) 10.0 1.2 (21.4) 22.7 1.9 (21.4) 22.8
Havells 43.8 (24.4) 12.6 4.7 (19.1) 24.8 10.6 70.0 100 3.2 (22.0) 28.7 5.1 (22.0) 28.7
Orient Electric 6.0 (20.0) 6.5 0.3 (32.6) 30.7 4.5 (80.0) 80.0 0.1 (60.9) na 0.3 (60.9) na
Symphony 3.4 (35.5) 24.5 0.7 (33.2) 80.7 21.6 70.0 670.0 0.6 (33.0) 68.4 8.4 (33.0) 68.4
TTK Prestige 7.7 31.1 5.7 0.9 60.7 8.3 11.4 210.0 30.0 0.6 54.7 8.9 4.7 54.7 8.9
V-Guard 12.7 (14.0) 12.1 1.1 (30.6) 16.9 8.5 (200.0) 30.0 0.6 (36.0) 7.4 1.5 (36.0) 7.4
Voltas 26.2 (46.8) 14.1 1.7 (58.9) 148.1 6.7 (190.0) 360.0 1.4 (59.3) 270.4 4.1 (59.3) 270.4
Aggregates 130.6 (24.8) 10.8 12.0 (28.1) 29.0 8.0 (31.4) 39.6
EMS
Amber 11.7 (51.3) 26.1 0.8 (60.8) 29.1 6.6 (160.0) 20.0 na na na na na na
Dixon 95.0 44.4 92.2 3.6 45.2 80.9 3.8 - (20.0) 2.1 57.6 96.4 35.4 58.4 96.4
Kaynes 6.0 18.4 65.3 0.8 22.0 67.2 13.7 40.0 20.0 0.6 15.3 81.2 9.2 15.3 64.8
Syrma SGS 9.4 (18.5) 32.8 0.6 26.5 15.1 6.0 210.0 (90.0) 0.3 42.8 (7.2) 1.6 43.3 (7.2)
Aggregates 122.1 14.7 75.9 5.7 3.5 61.3 2.9 6.7 81.5
Source: Company; HSIE Research
Exhibit 2: Change in estimates /Rating

Rating TP (INR) Target P/E (x) Old EPS New EPS Change %
Company CMP (INR)
OLD NEW OLD NEW OLD NEW FY25E FY26E FY27E FY25E FY26E FY27E FY25E FY26E FY27E
Consumer Durables
Bajaj Electricals 902 BUY BUY 1,200 1,200 40 40 17.5 26.4 37.4 16.2 24.8 35.4 -7.2 -6.1 -5.3
Crompton Consumer 438 BUY BUY 500 500 40 40 9.0 11.5 13.8 9.0 11.5 13.8 - - -
Havells 1,929 ADD ADD 1,900 2,000 55 55 25.8 32.5 39.3 25.2 32.5 39.4 -2.1 -0.1 0.1
Orient Electric 236 BUY BUY 310 300 38 38 5.0 7.4 9.5 4.7 7.0 9.1 -5.6 -4.6 -4.3
Symphony 1,797 REDUCE REDUCE 1,300 1,350 33 33 35.6 38.0 42.8 37.4 38.4 43.2 5.0 1.1 1.0
TTK Prestige 877 REDUCE REDUCE 765 775 33 33 18.5 22.2 26.4 17.5 21.2 25.5 -5.5 -4.4 -3.4
V-Guard 440 REDUCE REDUCE 410 420 40 40 7.9 9.8 11.7 7.6 9.5 11.4 -4.4 -2.6 -2.8
Voltas 1,792 ADD ADD 1,600 1,775 48 49 26.6 33.5 40.5 27.2 34.2 41.5 2.5 1.9 2.5
EMS
Amber 5,131 BUY BUY 5,150 5,600 40 40 77.9 118.0 159.9 77.9 118.0 159.9 - - -
Dixon 14,750 REDUCE REDUCE 11,000 12,000 60 60 122.7 167.3 223.2 123.5 169.1 225.3 0.6 1.1 0.9
Kaynes 5,392 REDUCE REDUCE 4,000 4,500 48 50 48.7 67.5 97.1 48.7 67.5 97.1 0.0 -0.0 0.0
Syrma SGS 409 BUY BUY 580 600 40 40 8.0 13.0 19.1 7.5 12.6 18.5 -6.8 -3.1 -3.3
Exhibit 3: Valuation Summary

EPS (INR) P/E (x) RoE % Rev EPS
Mcap
CMP TP CAGR CAGR
Company (INR RECO
(INR) (INR) FY24 FY25E FY26E FY27E FY24 FY25E FY26E FY27E FY24 FY25E FY26E FY27E FY24- FY24-
bn)
27 27
Consumer Durables
Bajaj Electricals 104 902 1,200 BUY 11.8 16.2 24.8 35.4 76.5 55.6 36.4 25.5 8.1 12.3 16.7 20.5 12 44
Crompton Consumer 282 438 500 BUY 6.8 9.0 11.5 13.8 64.0 48.7 38.1 31.7 13.4 15.9 18.0 19.0 13 26
Havells 1,209 1,929 2,000 ADD 20.3 25.2 32.5 39.4 94.9 76.4 59.4 49.0 18.1 20.0 22.6 23.9 15 25
Orient Electric 50 236 300 BUY 2.7 4.7 7.0 9.1 89.0 50.4 33.6 26.0 9.3 14.9 19.8 22.1 12 51
Symphony 124 1,797 1,350 REDUCE 21.9 37.4 38.4 43.2 82.2 48.1 46.7 41.6 18.5 32.9 30.0 29.1 20 26
TTK Prestige 122 877 775 REDUCE 16.5 17.5 21.2 25.5 53.2 50.2 41.3 34.4 11.3 11.2 12.5 13.8 11 16
V-Guard 191 440 420 REDUCE 5.9 7.6 9.5 11.4 74.2 58.1 46.2 38.6 15.1 16.9 18.4 19.0 14 24
Voltas 593 1,792 1,775 ADD 7.6 27.2 34.2 41.5 235.2 65.8 52.4 43.1 4.4 14.5 16.1 17.3 16 76
EMS
Amber Enterprises 173 5,131 5,600 BUY 39.4 77.9 118.0 159.9 130.1 65.9 43.5 32.1 6.7 12.0 15.7 18.0 24 59
Dixon Technologies 882 14,750 12,000 REDUCE 61.5 123.5 169.1 225.3 239.9 119.4 87.2 65.5 24.7 36.1 35.1 33.8 48 54
Kaynes Technology 345 5,392 4,500 REDUCE 28.7 48.7 67.5 97.1 188.0 110.7 79.8 55.5 17.9 25.1 26.7 29.0 48 50
Syrma SGS 73 409 600 BUY 6.1 7.5 12.6 18.5 66.8 54.7 32.6 22.2 6.9 8.0 12.3 16.0 39 44
Page | 2
Exhibit 4: Q2FY25E Result Preview

Company INR mn Q2FY24 Q1FY25 Q2FY25E YoY (%) QoQ (%) Comments
Consumer Durables
Revenue 11,128 11,549 11,757 5.7 1.8 Revenues to grow by 6% YoY. CP/Lighting to grow by
EBITDA 767 754 751 (2.1) (0.4) 6/4%. Lower oplev, logistics cost to lead to 50bps
Bajaj Electricals margin % 6.9 6.5 6.4 -50bps -10bps contraction in EBITDAM leading to 2% fall in EBITDA
PBT 505 383 436 (13.6) 13.9 CP margins at 3% (-210bps YoY), Lighting margins at
APAT 378 281 327 (13.6) 16.3 at 8.8% (+310bps YoY).
Revenue 17,823 21,377 18,989 6.5 (11.2)
Crompton (ex BGAL) revenues to grow by 10% YoY
EBITDA 1,745 2,324 1,878 7.6 (19.2)
led by 12/2% growth in ECD/ lighting. BGAL revenue
Crompton Consumer margin % 9.8 10.9 9.9 10bps -100bps
to fall by 12%. Ex BGAL margins to expand by 30bps
PBT 1,358 2,035 1,603 18.1 (21.2)
to 13.8%. BGAL margins at 3.5% (-610bps YoY).
APAT 972 1,517 1,193 22.7 (21.4)
Revenue 38,912 57,981 43,833 12.6 (24.4)
Havells (ex-Lloyd) revenues to grow 12% YoY led by
EBITDA 3,735 5,762 4,659 24.8 (19.1)
10/14/6/13% growth in switchgears/ cable/ lighting/
Havells India margin % 9.6 9.9 10.6 100bps 70bps
ECD. Lloyd revenues to grow 15% YoY. Ex-Lloyd
PBT 3,354 5,527 4,304 28.4 (22.1)
margins to be flat YoY at 13.4%. Lloyd margins -10%.
APAT 2,491 4,112 3,207 28.7 (22.0)
Revenue 5,669 7,549 6,036 6.5 (20.0)
Revenues to grow by 6% YoY. ECD/Lighting to grow
EBITDA 207 401 270 30.7 (32.6)
7/5%. Despite lower oplev, EBITDAM to expand 80bps
Orient Electric margin % 3.6 5.3 4.5 80bps -80bps
aided by cessation of consultancy fees. ECD margins
PBT 47 193 75 60.3 (61.0)
at 7.5% (-70bps YoY), Lighting margins at 13% (-20bps)
APAT -2 143 56 na (60.9)
Revenue 2,750 5,310 3,425 24.5 (35.5)
EBITDA 410 1,110 741 80.7 (33.2) Revenues to grow by 25% YoY led by 33% growth in
Symphony margin % 14.9 20.9 21.6 670bps 70bps domestic revenue (channel filling led). EBITDAM to
PBT 430 1,120 786 82.8 (29.8) expand by 670bps YoY benefitting from higher oplev.
APAT 350 880 589 68.4 (33.0)
Revenue 7,295 5,879 7,709 5.7 31.1
EBITDA 808 545 875 8.3 60.7 Demand pangs in kitchen category continues to be
TTK Prestige margin % 11.1 9.3 11.4 30bps 210bps a drag on revenue growth. We expect margins to
PBT 795 550 860 8.2 56.3 expand by 30bps YoY to 11.4%
APAT 593 418 646 8.9 54.7
Revenue 11,338 14,771 12,710 12.1 (14.0) V-Guard (ex-Sunflame) revenues to grow by 13% YoY
EBITDA 925 1,558 1,081 16.9 (30.6) led by 15/10/14% growth in Electronics/Electricals/CD.
V-Guard margin % 8.2 10.5 8.5 30bps -200bps Sunflame revenues to grow at 5% YoY. Ex-Sunflame
PBT 775 1,324 836 7.8 (36.9) margins to expand by 240bps YoY to 9.4%. Sunflame
APAT 590 990 633 7.4 (36.0) margins flat at 6%.
Revenue 22,928 49,210 26,163 14.1 (46.8) Revenue growth to be led by 18/10/14% YoY growth
EBITDA 703 4,238 1,743 148.1 (58.9) UCP/EMPS/EPS. UCP growth aided by channel filling.
Voltas margin % 3.1 8.6 6.7 360bps -190bps UCP margins to fall 20bps YoY to 7.5%; EMPS margins
PBT 1,181 4,809 2,223 88.2 (53.8) at 4% (-5.3% LY). PAT growth of 270% on a low base
APAT 367 3,342 1,359 270.4 (59.3) (EMPS provisions)
EMS
Revenue 9,271 24,013 11,688 26.1 (51.3) Revenue growth to be led by 25/45% growth in
EBITDA 596 1,962 769 29.1 (60.8) Consumer Durables/EMS segment. Mobility revenue
Amber Enterprises margin % 6.4 8.2 6.6 20bps -160bps to fall by 5% on order delays. Consumer Durables
PBT -95 1,101 64 (167.8) (94.2) margin at 4% (+20bps). EMS margins at 7.8%, +250bps
APAT -69 724 -22 (68.6) (103.0) YoY (Ascent integration). Mobility margins 20.5%.
Revenue 49,432 65,798 95,011 92.2 44.4
Revenues to grow by 92% YoY led by 156% growth in
EBITDA 1,989 2,479 3,599 80.9 45.2
Mobile & EMS segment. Given higher mix of high-
Dixon Technologies margin % 4.0 3.8 3.8 -20bps 0bps
volume low-margin Mobile & EMS segment,
PBT 1,461 1,723 2,884 97.4 67.4
EBITDAM to contract by 20bps YoY to 3.8%.
APAT 1,073 1,337 2,107 96.4 57.6
Revenue 3,608 5,040 5,966 65.3 18.4
Revenues to grow by 65% with auto, industrial and
EBITDA 488 669 816 67.2 22.0
EV leading growth. We expect margins to expand by
Kaynes Technology margin % 13.5 13.3 13.7 20bps 40bps
20bps YoY to 13.7%. PAT growth of 81% YoY is
PBT 394 641 741 88.0 15.6
to aided by higher other income.
APAT 323 508 585 81.2 15.3
Revenue 7,117 11,599 9,448 32.8 (18.5)
Revenues to grow by 33% YoY but likely to fall 19%
EBITDA 490 446 564 15.1 26.5
QoQ on moderation of consumer revenues. We expect
Syrma SGS margin % 6.9 3.8 6.0 -90bps 210bps
margins to fall 90bps but improve 210bps QoQ to 6%
PBT 383 295 374 (2.3) 26.9
on lower consumer mix (low margin)
APAT 297 193 276 (7.2) 42.8
Page | 3
Exhibit 5: Copper prices up 11% YoY; down 5% QoQ Exhibit 6: Aluminum prices up 12% YoY; down 5% QoQ
Copper (INR/KG) Aluminium (INR/KG)
1000 350
300
800
250
600 200
150
400
100
200
50
0 0
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Sep-17
Sep-16
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Sep-23
Sep-24
Sep-17
Sep-23
Sep-16
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Sep-24
Mar-21
Mar-17
Mar-18
Mar-19
Mar-20
Mar-22
Mar-23
Mar-24
Source: Bloomberg Source: Bloomberg
Exhibit 7: Rupee has depreciated by 1% YoY Exhibit 8: HDPE prices have risen 5% YoY; flat QoQ
USD/INR Polypropylene (INR/kg)
90.0
140
85.0
120
80.0
100
75.0
80
70.0
60
65.0
40
60.0
55.0 20
50.0 0
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
Mar-23
Mar-24
Sep-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-21
Sep-22
Sep-23
Sep-24
Sep-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-21
Sep-22
Sep-23
Sep-24
Mar-21
Mar-17
Mar-18
Mar-19
Mar-20
Mar-22
Mar-23
Mar-24
Source: Bloomberg Source: Bloomberg
Page | 4
0
10000
20000
5000
15000
100
200
400
500
300
0
0
1000
1500
200
400
600
BUY:
ADD:
SELL:
Oct-23 Oct-23 Oct-23 Oct-23
Nov-23 Nov-23 Nov-23 Nov-23
Dec-23 Dec-23 Dec-23 Dec-23
Jan-24 Jan-24 Jan-24 Jan-24
Rating Criteria
Feb-24 Feb-24 Feb-24 Feb-24
1 Yr Price history
Mar-24 Mar-24 Mar-24 Mar-24
Dixon
Apr-24 Apr-24 Apr-24 Apr-24
V-Guard
May-24 May-24 May-24 May-24
Orient Electric
Bajaj Electricals
Jun-24 Jun-24 Jun-24 Jun-24

Jul-24 Jul-24 Jul-24
Jul-24
Aug-24 Aug-24 Aug-24
Aug-24
Sep-24 Sep-24 Sep-24
Sep-24
Oct-24 Oct-24 Oct-24
>+15% return potential

Oct-24

+5% to +15% return potential
0
2000
4000
6000
200
400
600
500
0
1000
2000
1500
0
1000
2000
3000
Oct-23
>10% Downside return potential

Oct-23 Oct-23 Oct-23
Nov-23 Nov-23 Nov-23
Nov-23
Dec-23 Dec-23 Dec-23
Dec-23
Jan-24 Jan-24 Jan-24 Jan-24
Feb-24 Feb-24 Feb-24 Feb-24
Mar-24 Mar-24 Mar-24 Mar-24
Apr-24 Voltas Apr-24 Apr-24

Symphony
Apr-24
May-24 May-24 May-24
May-24
Jun-24 Jun-24
Jun-24 Jun-24
Kaynes Technology
Jul-24 Jul-24
Jul-24 Jul-24
Crompton Consumer
Aug-24 Aug-24
Aug-24 Aug-24
Sep-24 Sep-24
Sep-24 Sep-24
Oct-24 Oct-24
Oct-24 Oct-24
200
400
800
600
0
0
2000
4000
6000
500
0
1000
1500
0
1000
2000
3000
Oct-23
Oct-23
Oct-23 Oct-23
Nov-23
Nov-23 Nov-23 Nov-23
Dec-23
Dec-23 Dec-23 Dec-23
Jan-24
Jan-24 Jan-24 Jan-24
Feb-24
Feb-24 Feb-24 Feb-24
Mar-24
Mar-24 Mar-24 Mar-24
Apr-24 Apr-24
Apr-24
Syrma
Apr-24
Amber
May-24
TTK Prestige
May-24
Havells India
May-24 May-24
Jun-24 Jun-24 Jun-24 Jun-24
Jul-24 Jul-24
Jul-24 Jul-24
Aug-24 Aug-24 Aug-24
Aug-24
Sep-24 Sep-24 Sep-24
Sep-24
Oct-24 Oct-24
Oct-24 Oct-24
Page | 5
Disclosure:
I, Paarth Gala, BCom author and the name subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. SEBI conducted the inspection and
based on their observations have issued advise/warning. The said observations have been complied with. We also certify
that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.
more in the subject company at the end of the month immediately preceding the date of publication of the Research Report.
Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does have/does not have any material
conflict of interest.
Any holding in stock – NO
Disclaimer:
the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice
before investing. Nothing in this document should be construed as investment advice. Each recipient of this document
should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in
securities of the companies referred to in this document (including merits and risks) and should consult their own advisors
to determine merits and risks of such investment. The information and opinions contained herein have been compiled or
arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not
been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy,
completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any
company or companies or their securities mentioned herein are not intended to be complete. HSL is not obliged to update
this report for such changes. HSL has the right to make changes and modifications at any time.
have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as
ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be
sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation
in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or
income, etc.
Page | 6
securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from
time to time or may deal in other securities of the companies / organizations described in this report. As regards the
HSL or its associates might have received any compensation from the companies mentioned in the report during the period
preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings,
corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or
specific transaction in the normal course of business.
HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third
party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any
material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based
on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other
reports that are inconsistent with and reach different conclusion from the information presented in this report.
investing.
HDFC Securities
Page | 7

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11 October 2024 Results Review Q2FY25

Tata Consultancy Services

▪ BFSI acceleration: Revenue growth of 1.1% QoQ CC in Q2FY25 decelerated

Exhibit 1: Quarterly consolidated Financial Snapshot

Source: Company, HSIE Research Source: Company, HSIE Research

Source: Company, HSIE Research Source: Company, HSIE Research

Exhibit 7: Strong technology partnerships

Exhibit 8: High credentials in Microsoft ecosystem

Exhibit 9: Number of GenAI POCs engagements

Source: Company, HSIE Research

Source: Company, HSIE Research Source: Company, HSIE Research

Exhibit 12: Steady DSO Exhibit 13: Stable OCF/FCF generation

Source: Company, HSIE Research Source: Company, HSIE Research

Exhibit 14: Strong payout policy reflected in consistent buyback history

Exhibit 15: Deal wins in CY24

Exhibit 16: Deal TCV trend

Source: Company, HSIE Research

Exhibit 17: TCS - Performance by Verticals

(QoQ Growth, %) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

Exhibit 18: TCS - Performance by Geographies

(QoQ Growth, %) Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

Exhibit 19: TCS - Client Metrics

Exhibit 20: TCS - Employee Metrics

Exhibit 21: Change in estimates

Source: Bloomberg, HSIE Research Source: Bloomberg, HSIE Research

Consolidated Balance Sheet

Consolidated Cash Flow

Healthcare & Life-sciences vertical recovery expected by end-FY25E: Healthcare &

Exhibit 1: Quarterly Financial Snapshot

Exhibit 2: Key deal wins in CY24

Exhibit 3: Revenue growth remains cyclical

Source: Company, HSIE Research

Total Revenue 114.0 0.2 5.1 428.7 9.6

Exhibit 6: OEM led growth in Transportation vertical

Source: Company, HSIE Research

Exhibit 7: TELX - Performance by geography

Growth YoY % Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25

Exhibit 8: Client metrics – concentration has increased

Exhibit 10: Steady and industry leading margins

Source: Company, HSIE Research

Source: Company, HSIE Research

Exhibit 12: High fixed price component supporting margin

Source: Company, HSIE Research

Exhibit 13: Change in estimates

Exhibit 16: Superior revenue + margin driving valuations

Consolidated Balance Sheet

Consolidated Cash Flow

ADD: +5% to +15% return potential

REDUCE: -10% to +5% return potential

Consumer Durables & EMS

monitorable. We expect our consumer durable universe to register a Orient

▪ Soft demand in a seasonally weak quarter: Q2 is seasonally the weakest EMS

Exhibit 1: Q2FY25 Quarterly Estimates Snapshot

Exhibit 2: Change in estimates /Rating

Exhibit 3: Valuation Summary

Exhibit 4: Q2FY25E Result Preview

Source: Bloomberg Source: Bloomberg

Mar-24 Mar-24 Mar-24 Mar-24

Jun-24 Jun-24 Jun-24 Jun-24

>+15% return potential