The brokerage has raised its FY22E EBITDA multiple to 6.5 times, based on the company’s execution capabilities and consistent uptick in EBITDA.
ICICI Securities has given a hold rating to Tata Communications Ltd with a target price of Rs 569. The share price moved down by -0.10 per cent from its previous close of Rs 589.55. The stock’s last traded price is Rs 588.95.
The new MD & CEO, Tata Communications, Mr Lakshminarayanan, has discussed his vision with focus on transforming the company into a digital ecosystem enabler, and identified six services as pillars to achieve it. He has set an ambitious target of reaching 20 per cent RoCE in the next three years aided by double-digit EBITDA growth; ramp-up in execution is critical to achieve this in the brokerage view.
Enterprises embracing digital platforms in the new post-Covid world is a tailwind for the company’s strategy. The brokerage has raised its FY22E EBITDA multiple to 6.5 times, based on the company’s execution capabilities and consistent uptick in EBITDA. The brokerage has raised the target price to Rs 569 (from Rs 508).
Investment Rationale
A report from Gartner forecasts enterprise networks worldwide to remain flat over CY18-CY23, but sees growth in new generation network solutions such as cloud connect and SD-WAN. Tata Communications intends to grab higher market share in these solutions and expand its presence in cross-border deals. The company remains weak in in-market deals in large markets such as the US and Europe. It also intends to participate in the enterprise mobility and apps market which is expected to reach$254 billion in CY23 (from US$237 billion in calender year 2018).
Source: ICICI Securities
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 4397.89 crore, up 4.00 per cent from last quarter sales of Rs 4228.72 crore and up 3.64 per cent from last year's same quarter sales of Rs 4243.51 crore. The company reported net profit after tax of Rs -271.99 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 74.98 per cent stake in the company as of March 31, 2020, while FIIs held 17.48 per cent, DIIs 1.79 per cent and public and other 5.75 per cent.
Get Unlimited Access to The Economic Times
