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    This Tata stock is a bet on hybrid work culture splitting colleagues into WFH and WFO

    Synopsis

    Domestic brokerage ICICIdirect, which is amongst the most bullish on the Tata Group stock, has a price target of Rs 1,260, signalling an upside potential of 17 per cent.In the June quarter, the company's revenue grew 5.1 per cent year-on-year (YoY) to Rs 4,311 crore with data revenues growing 7.6 per cent YoY to Rs 3,340 crore.

    This Tata stock is a bet on hybrid work culture splitting colleagues into WFH and WFO
    In the last five years, the share price of Tata Communications has grown at a CAGR of 12 per cent. Analysts say that the stock remains a beneficiary of the new normal of hybrid work structure, increased conferencing needs thereof and overall digitisation at enterprise levels.

    Domestic brokerage ICICIdirect, which is amongst the most bullish on the Tata Group stock, has a price target of Rs 1,260, signalling an upside potential of 17 per cent.

    In the June quarter, the company's revenue grew 5.1 per cent year-on-year (YoY) to Rs 4,311 crore with data revenues growing 7.6 per cent YoY to Rs 3,340 crore.

    ICICI Securities' analyst Bhupendra Tiwary said Tata Communications' growth will be driven by platforms - cloud, edge & security, next generation connectivity, NetFoundry, MOVE & IoT, wherein each has a robust market size growth potential of 15-25 per cent CAGR over the next 4-5 years.

    "We expect ~9.4 per cent revenue CAGR in FY22-24E in the overall data segment, driven by likely acceleration in growth from H2FY23 onwards. We expect overall margins to be at 25 per cent in FY24 vs 25.3 per cent in FY22, with some weakness likely in FY23," he said.

    Emkay Global said for any meaningful re-rating of the stock, revenue pick-up and consistency in guidance are essential. "A key positive is the healthy balance sheet, which has seen a sharp improvement in the last few years. The strong balance sheet should support in tapping both organic and inorganic opportunities. We believe that both capex and opex will see an acceleration ahead, in line with the company’s guidance," it said.

    The brokerage has a target price of Rs 1,210 on the stock.

    The company's management has maintained FY23 margins guidance range of 23-25 per cent. "However, they also stated that higher travel and admin costs will accrue going ahead with reopening of offices. We, however, expect margins to bounce back in FY24, driven by revenue growth recovery," Tiwary said.

    The stock has rallied around 13 per cent in the last one month but lost nearly 26 per cent of its market capitalisation on a year-to-date basis.

    Out of eight analysts covering the stock, none has a sell rating. The average target price signals an upside potential of around 15 per cent.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)






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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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