Fundamentals

TATA ELXSI 

Ticker : 500408 BUY: Rs 1196
Target: Rs 1375 

The company is engaged in the design and development of computer hardware and software. Over last three years, its net profit has grown at a CAGR of 32.1 per cent. It has delivered an ROE of 40.35 per cent on an average over the last three years. In Q4FY18, its topline grew by 15 per cent YoY. The EBITDA margin expanded to 25.3 per cent from 23.09 per cent. Its PAT jumped by 61.6 per cent YoY due to the growth in other income. In FY18 too, the company grew by 15 per cent. The revenue from IP segment has grown by 100 per cent. The management expects high growth from IP segment in FY19 too. It is adding new customers and focus ing to develop new technologies which will trigger growth in FY19. The business from automotive sector (60 percent of revenue) continues to remain robust. We recommend it as a BUY. 

MAGMA FINCORP 

Ticker : 524000 BUY: Rs 183
Target: Rs 205 

The company offers vehicle and equipment financing solutions to individuals and small businesses in India. It has also started offering tractor finance, SME loans and insurance. Its network is wide consisting of 305 branches and more than nine lakh active customers. By the end of FY18, the company had AUMs of Rs 15,555 crore and loan book of Rs 12,039 crore. The vehicle finance segment will trigger the growth in AUMs due good monsoons and the government’s shift towards BS IV. Over the last three years, the company’s GNPAs have reduced significantly from 10 per cent to 7 per cent. The insurance segment is also gaining traction, which will further aid its growth. It is trading at attractive valuations, with P/E of 21.2x and P/B of 2.04x. Thus, we recommend investors to BUY the scrip.