Industry-leading margins continue on the back of operational levers like utilization, pyramid rationalization, better realization from fixed-price projects, better onsite/offshore mix | Tata Elxsi Q4FY22 Conference Call Highlights

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  • Q4FY22: Revenues from operations at Rs. 2,470.8 Cr, + 35.3% YoY Profit. Operating Margin at 31.0%; Net Margin (PBT) at 29.6%. Profit Before Tax (PBT) at Rs. 745.5 Cr, +45.6% YoY. Profit After Tax (PAT) at Rs. 549.7 Cr, +49.3% YoY
  • FY22: Revenues from operations at Rs. 681.7 Cr, + 7.3% QoQ, + 31.5% YoY Profit. Operating Margin at 32.5 %; Net Margin (PBT) at 31.5 %. Profit Before Tax (PBT) at Rs. 220.3 Cr, + 10.0% QoQ, +36.2% YoY. Profit After Tax (PAT) at Rs. 160.0 Cr, + 38.9% YoY.
  • The margin was impacted (-150bps) due to wage hikes given to junior-level employees (65-70% of the workforce in January 2022) which was offset by operational levers like utilization, pyramid rationalization, and better realization from fixed-price projects. EBIT margin of 30.1% vs 31% in Q3FY22. EBIT margin improved on the full-year basis from 26.2% in FY21 to 28.8% in FY22.
  • Segment Highlights: Embedded Product Design (EPD), the company’s largest division, grew by 35.7% YoY, 7.5% QoQ. Industrial Design and Visualization (IDV) grew by 36.0% YoY, 8%QoQ.
  • Industries: Transportation continues to grow strongly, registering a revenue growth of 7.7% QoQ, and 37.9% YoY, aided by large deal wins across EV, autonomous and digital. Media and Communications deliver consistent and sustained growth of 7.3% QoQ and 33% YoY, powered by Design Digital and platform-led deals. Healthcare continues to grow strongly powered by digital and connected health, reporting 7.3% QoQ and 66.6% YoY growth in revenues.
  • Geography: Europe (+10.5% QoQ) led growth. Growth in the USA remained tepid at 3.8% QoQ while India / RoW grew 5.3%/7.9% QoQ, respectively.
  • After 2 consecutive quarters of 16%+ growth, top client growth moderated to 8.1% QoQ for the quarter but top 2-5 clients reported robust growth of 7% QoQ while growth declined in top 6-10 accounts by 3.2% QoQ.
  • Human resource: 50-60% of the people who are leaving have joined tata elxsi in the last six or 12 months and there are people who have joined virtually and has left virtually. Attrition increased sharply by 260bps QoQ to 20.8%. Attrition is higher at the junior level while mid to senior levels are largely stable. Management hopes to manage the demand and supply mismatch in the next 2-3 quarters through increased hiring. For senior-level, wage hikes would be rolled out in April, 2022 and impact of the same should neutralize by operational efficiencies and increase in volumes. On the workforce front, net addition for the quarter stood at 343. Supply-side challenges persist and the company is aggressively investing in accelerated hiring of freshers and laterals. It hired ~1.1k freshers in FY22 and intends to add ~2.5-3k freshers of the total gross hiring of ~3-3.5k in FY23.
  • Tata Elxsi, has launched TEngage, the first-ever truly digital health platform designed for omnichannel care at the HIMSS Global Health Conference & Exhibition being held in Orlando, Florida from 14–18 March 2022. Tata Elxsi’ TEngage allows hospitals and healthcare providers to offer a unified patient experience across all channels and delivers healthcare anytime, anywhere.
  • Over a period of three years, the business mix (transportation, media and communication, healthcare vertical) would be about 40-40-20.  Healthcare and medical currently is the smallest one.
  • Company is winning increased number of transformation and platform led deals which is driving growth in media while healthcare is being driven by digital and connected health engagements. Within media, expansion into newer geographies like the Middle East, Africa, India and Latin America has aided growth tremendously.
  • Management stated that deal pipeline is robust and it is seeing a lot of traction in large deal discussions. Newer geographies, good deal wins, large multi-year deals and strong order book give confidence to management as the company enters FY23.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.

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