India’s Top Tech Stocks: Tata Elxsi and Happiest Minds as Multibagger Opportunities
India's tech sector is witnessing a surge, with companies like Tata Elxsi and Happiest Minds leading the charge. In this article, we delve into the performance, growth trends, and future prospects of these tech giants.
Introduction to Tata Elxsi and Happiest Minds
Tata Elxsi and Happiest Minds are pioneers in the niche business of providing enterprise digital transformation and next-gen product platform engineering through IoT, Big Data Analytics, Cloud, Mobility, Virtual Reality, Cognitive Computing, and Artificial Intelligence (AI). These services are in high demand with the global enterprise digital spend projected to grow to around 50% of total technology spend by 2025, at a CAGR of 26.4%.
Growth Prospects and Revenue Analysis
Tata Elxsi: From 2013 to 2022, Tata Elxsi has seen a remarkable revenue growth of more than 4X, with operating profit, PAT, and CFO growing over 11X, 26X, and 13X, respectively. Key segments like Transportation, Media and Communications, Healthcare, and Design Business IDV continue to show strong growth. Its financial highlights for Q2FY23 included revenues growing by 28.2% YoY, with OPM at 29.7% and NPM at 28%, and PAT growing by 39.1% YoY.
Happiest Minds: Happiest Minds has transformed significantly, making an operating profit of Rs. 295 Crore in TTM from an operating loss of Rs. 51 Crore in 2013. During 2013-2022, the company's sales grew more than 17X and PAT grew at a consistent CAGR of 113%. Revenue from segments like Edutech, Hitech, BFSI, and TME rose 23%, 16-18%, 14%, and 13% in the last 8 quarters, respectively. The company’s digital service offerings, such as Digital Infrastructure/Cloud and Security Solutions, are also seeing significant growth.
Driving Factors for Continued Growth
Global IT growth is expected to be robust, with Digital IT spending growing at a CAGR of 26.4%. This growth is supported by increasing adoption of AI and ML in various sectors. Additionally, organizations across the globe are focusing on digital transformation, which is driven by the desire to enhance performance, optimize processes, and improve security. The U.S. and Europe regions account for a significant portion of IT export revenue.
Technological advancements, particularly in AI, cloud computing, automation, and the internet of things (IoT), are playing a crucial role in this transformation. According to BCG, businesses across 13 countries plan to increase their spending on digital transformation in 2023 compared to 2022. While many companies plan to invest in business model transformation and sustainability, concerns about ROI persist.
The trend towards a hyper-connected world is fostering the development of intelligent drones, IoT devices, and virtual workspaces. The global robotics market is projected to reach $215 billion by 2030, further underlining the potential for growth in tech stocks.
Conclusion
Tata Elxsi and Happiest Minds are well-positioned to capitalize on the growing demand for enterprise digital transformation and next-gen product platform engineering. Despite economic and market challenges, these companies are likely to see continued growth in the coming years, driven by technological advancements and increasing digitalization efforts. The long-term prospects for these stocks look promising, making them potential multibagger investment opportunities.