Emkay Global Financial has given Buy recommendation for Tata Communications with a target price of Rs. 1650 in its research report issued on Apr 23, 2022
Emkay Global Financial’s report on Tata Communications
TCOM posted revenue growth of 1.9% qoq/4.7% yoy, largely in line with our estimates. However, higher opex led to a 6% miss on EBITDA. RPAT was down 7.6% qoq due to lower EBITDA, higher D&A and taxes, offset in part by higher other income. The recovery in the Data segment (up 2.1% qoq) continued, supported by robust growth in the digital platform (up 3.4% qoq). Core connectivity growth was at 0.5% qoq. All digital segments, except for Collaboration, grew in double-digits yoy in FY22. TCOM further cut its net debt by Rs4.4bn to Rs67.4bn from last quarter. With this, the last 2 years’ cumulative reduction stands at Rs24.3bn. Topline recovery should continue to be gradual to reach double-digit yoy growth as the deal funnel is impacted by high attrition.
We trim our revenue estimates marginally. We are cutting FY23-24E EBITDA by 4-8% due to higher-than-expected cost inflation. Maintain Buy with a revised Mar’24E SoTP-based TP of Rs1,650 (Rs1,800 earlier). Higher COE has led to a reduction in target multiple.