The brokerage has revised its EBITDA estimates upwards by 5 per cent, 10 per cent for FY21, FY22, respectively.
ICICI Direct has given a hold rating to Tata Communications with a 12-month target price of Rs 600. The share price moved up by 2.52 per cent from its previous close of Rs 579.15. The last traded stock price is Rs 593.75.
Data business continued to witness healthy traction with strong margin turnaround in growth and stable trajectory in traditional services driving profitability, says the brokerage. The company witnessed strong 9.8 per cent year on year, 9.1 per cent quarter on quarter revenue uptick in the growth segment driven by a surge in conferencing traffic.
Margins expanded 510 bps quarter on quarter to 11.6 per cent, recording double digit margin for the first time. The company also guided for double digit growth in data revenue and EBITDA growth in the medium term and would share its strategic outlook later this month. Investment Rationale
The consistent performance of the data segment is impressive but the brokerage is waiting for further clarity on strategic growth plans. Rising internet traffic and work from homes (WFH) are structurally positive for the company.
The brokerage has revised its EBITDA estimates upwards by 5 per cent, 10 per cent for FY21, FY22, respectively. However, post the sharp run up of around 130 per cent in the last three months from lows, it believes the valuations are full. Thus, the brokerage has downgraded the stock to hold from buy. It has assigned an EV/EBITDA multiple of 7.5 times for data and 2 times for voice FY22 EBITDA. The brokerage has deducted Rs 1,541 crore (Rs 54/share) for AGR liability to arrive at its revised target price of Rs 600/share.
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
