ICICI Direct has given Buy recommendation for Tata Communications recommended buy rating on the stock with a target price of Rs 1485 in its research with a target price of Rs. 1485 in its research report issued on Jun 10, 2021
ICICI Direct’s research report on Tata Communications
Tata Communication (TCom) in its investor day revisited (and revised some of) its strategic growth path. The core growth path remained same with steps like deeper engagement with key clients (along with dedicated team for remaining clients), revamped operating structure, transformation from product to platform and Focus on Fixed + Usage model for digital platforms. On the medium term financial targets, there were few upgrades with a) RoCE target of 25-30% (vs. 20% target earlier), b) EBITDA margin of 23-25% (earlier guidance: 22-25%), c) maintaining optimal debt (vs. debt reduction guidance earlier) and d) double digit data revenues target (same as before) with incremental margin buffer/cash being reinvested to drive growth.
Thus, we maintain BUY with a revised SoTP target price of Rs 1485/share (earlier Rs 1290/share), as we raise our data segment target multiple to 10x EV/EBITDA vs. 9x earlier.