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Tata Communications - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-03 08:41:30

Tata Communication reported a better-than-expected performance on the operating front led by superior revenues and margins in the data segment. The topline was at Rs. 4403 crore, up 5.6% YoY, 0.1% QoQ, led by superior data revenues (forming ~82% of revenues) that grew 9.9% YoY. EBITDA came in at Rs. 1042 crore, up 26.2% YoY, with margins at 23.7% (up 385 bps YoY) driven by strong data margins of 27.1% (up 450 bps YoY), aided by structural cost efficiency (likely to remain) of ~Rs. 100 crore (including moving of employee base in India) and Covid-19 led benefits (savings in travel costs, lower SG&A costs and concession from the government from international entities). The company reported a PAT of Rs. 257.8 crore, up ~2.4x YoY.

Valuation & Outlook

The consistent performance of the data segment is impressive with step up in margins led by scale & cost initiatives. The rising internet traffic and work from home (WFH) are structurally positive for the company. We revise our EBITDA estimates upwards by ~20% and ~14% for FY21 and FY22, respectively. The company's strategic growth plan, focused approach and consistent improvement in data segment warrant a multiple re-rating, a part of which is visible in the price run up. We believe continued performance and deleveraging possibilities bode well for the company. Thus, we upgrade to BUY (vs. HOLD earlier) with a revised SoTP target price of Rs. 880/share.

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Shares of TATA COMMUNICATIONS LTD. was last trading in BSE at Rs.797.75 as compared to the previous close of Rs. 759.8. The total number of shares traded during the day was 42856 in over 996 trades.

The stock hit an intraday high of Rs. 797.75 and intraday low of 760. The net turnover during the day was Rs. 34113583.

Source: Equity Bulls

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