Tata Elxsi Ltd. -multiple triggers ahead ...Dalal & Broacha Stock Broking

Investment Case:
Coming out of a bad patch between 2008-2011 due to ramp down of one of its
clients in Japan, we expect Tata Elxsi (TELX) to grow at greater than 20% yoy in top
line over next few years.
Though the overall growth in the company looks muted for the above reason,
other geographies have delivered a robust growth during the same period. Japan
now contributes only 10% to the total revenues from the previous 35-40%.
Besides the above, growth during above period was muted because of . Disappointment in Visual computing business both in revenue and
profitability . Slower than expected rollout of key technologies and slowdown in global
economy

TATA ELXSI - target 255 :: Anand Rathi

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Company Description
Tata Elxsi Limited is engaged in providing systems integration
and software development services in the information
technology field. The Company operates in two business
segments: software development & services and systems
integration & support. The Company operates in four divisions:
embedded product design, which provides technology
consulting, new product development, system integration and
testing services for product companies, service providers and
start-ups; industrial design division include consumer insight,
branding, industrial design, visual design & merchandising,
design engineering and manufacturing support; visual
computing labs offers animation, visual effects (VFX) and three
dimensional (3D) stereoscopic content for feature films,
episodic television and advertising, and the systems integration
division implements and integrates complete systems and
solutions for high-performance computing, broadcast, virtual
reality, storage and disaster recovery.
Communication and Broadcasting The company derives
almost 65% of its revenue from the communication services and
broadcasting software development business. This is a high
margin business and a growth opportunity for the company. TE
is considered as the top third party vendor for the WiMax
solutions in the world. The company is executing a WiMax
network contract with BSNL. It has also developed an IP in the
WiMax arena and is now developing services around the same,
to take the growth in this area further.
Industrial Design and Mechanical Engineering Tata Elxsi
has setup an Industrial Design Division (IDD) in Europe along
with some of the best known designers in Europe. It provides
design services like package design and product design for
some of the FMCG companies.
Visual Computing Visual Computing is the segment which the
company is focusing at, along with communication and
broadcast to show fast growth. Presently this is a loss making
segment. Tata Elxsi has started a VFX studio in Santa Monica
to cater to its Hollywood clients such as Walt Disney, MGM and
Sony. It has developed popular motion pictures for the Indian
audiences like “Road- Romeo”, “TaraRumpum” and “Tare
Zameen Par”. It has access to the World’s Fourth Fastest
Computer (16,500 CPU’s) thus reducing rendering time by 75%.