Emkay Global Financial has given Buy recommendation for Tata Communications with a target price of Rs. 1700 in its research report issued on Oct 21, 2021
Emkay Global Financial’s report on Tata Communications
TCOM reported a 5% EBITDA beat in Q2, adjusting for one-time benefits of Rs500mn. Revenue growth was in-line at 1.7% qoq, pointing toward a gradual recovery across businesses. The Digital Platforms & Services segment’s revenue grew 2.3% qoq, driven largely by cloud, hosting & security and media services. However, revenue fell 9% yoy, which can be attributed to the Collaboration portfolio (down 25% yoy) on high traffic in Q2FY21. Revenue prospects are improving, with a double digit rise in order book in Q2 on a qoq and yoy basis. But near-term challenges like chipset shortages & logistical issues shall impact network equipment availability negatively, resulting in execution delays.
With the full-fledged revenue revival being pushed to Q4 from Q3, we have cut FY22-24E revenue by 3-4%. This remains the only stumbling block now, but is key to the next leg of up-move. Retain Buy with an SoTP-based Dec’22 TP of Rs1,700 (Dec’23E EBITDA)