Prabhudas Lilladher Recommends 'Hold' on Tata Elxsi, Sets Target at Rs 5500

• Tata Elxsi's Q3 revenue grew 3.2% QoQ CC, exceeding estimates, driven by strong Transportation vertical growth (7.3% QoQ CC).
• Transportation growth was fueled by an anchor account ramp-up and recovery in strategic top accounts, despite a 7.5% decline in non-top 10 accounts.
• Media & Communications (M&C) and Healthcare & Life Sciences (H&L) verticals saw a third consecutive quarter of decline due to sporadic spending and structural issues.
• Margins surpassed estimates by 140 basis points QoQ, with utilization at 75% and an aspiration to reach 85% through automation and AI.
• Prabhudas Lilladher revised margin estimates upwards for FY26E, FY27E, and FY28E, maintaining a 'Hold' rating with a target price of Rs 5,500.

Why It Matters: Prabhudas Lilladher advises holding Tata Elxsi, citing strong Q3 revenue and margin performance but structural issues in some verticals.