Wait for earnings before taking an investment decision on Tata Elxsi: Dipan Mehta
Elixir Equities Director Dipan Mehta believes an investment decision on Tata Elxsi should be made only after its earnings for the March quarter.
“When the correction was there in all midcap software stocks, that was the time to get into Tata Elxsi. This stock, if you compare it with some of its peer group companies, is the best performing midcap software company in terms of growth rates, operating profit margins and potential, given its very niche offering and focus on specific verticals… Software spending is going to keep on increasing because of disruption that those sectors are facing, especially auto, healthcare and entertainment,” he says.
Diwan feels that the risk reward is not in favour of investors at the current juncture. “Maybe at corrections or when valuations are more reasonable, that could be because earnings have gone up, that may be the time to get into Tata Elxsi. It has been a market favorite and always trade at a premium multiple so one shouldn’t get too impacted that you’re paying a very high P/E multiple for such a business per se. But at this point of time, I would just like to wait and watch,” he adds.
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