YES Securities' research report on Tata Communication
Tata Communication (TCOM) reported sequentially improved performance for the quarter. Both, sequential revenue growth and EBITDA margin were slightly above estimates. It reported sequential revenue growth of 2.8% QoQ, led by increase in the revenue of Digital Platforms and Services by 6.1% QoQ. Voice revenue declined by 6.7% QoQ; while data revenue increased by 4.6% QoQ. There was sequential improvement in EBITDA margin(up 51 bps QoQ) led by optimization of other operating expenses. Net debt (as of 30th Sep 2022) increased by Rs 2.6bn QoQ to Rs 64 bn. It was improved performance as data portfolio grew double digit YoY after a long time. We expect the voice business to continue to decline as per the industry trend; while Data segment would continue to drive the overall performance of the company. Private 5G related capex going ahead should also drive opportunities for the company. We expect that increase in other expenses led by travel and admin cost can put near term pressure on EBITDA margin. We estimate revenue CAGR of 8.7% over FY22‐24E with average EBITDA margin of 25.3%.
Outlook
We maintain our NEUTRAL rating on the stock with revised target price of Rs 1,214/share based on EV/EBITDA of 8x(unchanged multiple) on FY24E. The stock trades at EV/EBITDA of 9.3x/8.0x on FY23E/FY24E EPS.
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