Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Tata Communications - New normal deserves an upgrade - ICICI Securities

Posted On: 2020-08-03 08:43:29

TCom's Q1FY21 EBITDA came in at Rs10bn, 17.5% beat to our estimate, largely due to expansion in traditional services margin to 42% vs 37% in Q4FY20. The margin expansion was driven by cost optimisation and automation. TCom sees only Rs500mn (220bps) of cost to come back on normalisation (benefit on account of lower travel, marketing etc). TCom also hinted at the significant rise in sales funnel, which increases our confidence on revenue growth acceleration in coming quarters. We have raised our EBITDA estimate for TCom by 13.4% and 14.2% for FY21 and FY22 and accordingly, we increase our target price to Rs830 (from Rs569). We have also increased our EBITDA multiple to 7.5x (from 6.5x) on expansion in ROCE to 16% in FY22. We upgrade TCom to ADD (from Hold).

- Why upgrade to ADD (from Hold)? 1) TCom in the past two years has expanded margins in traditional services by 640bps (adjusted from Ind-AS 116 and Rs500mn benefit of Covid-19). The large part of margin expansion can be attributed to cost optimisation efforts and internal digital transformation (automation); and revenue growth in this segment has been low; however, it is still growing faster than industry. Though we were factoring margin expansion in our estimates, magnitude of margin expansion has surprised positively. Further, company still sees headroom for more margin expansion; 2) TCom indicated its sales funnel looks extremely strong and the company has seen highest addition in Q1FY21. It has also seen traction for its innovative products MOVE and NetFoundary and 3) efforts to transform from being a connectivity provider to platform service provider.

- Right product at the right time: Covid-19 outbreak has pushed enterprise to embrace work-from-home culture. Enterprises are faced with new challenges of managing productivity of scattered workforce, security risk, supply chain etc. They are restructuring business model with much higher integration of digital ecosystem to address rising business complexity. TCom, with its Secure Connected Digital Experience (SCDx), is well positioned to service these enterprises in post-Covid world. It helps enterprise in faster adoption of digital, which would aid in enhancing employee productivity, providing secure connectivity and cloud though NetFoundary. SCDx provides a fully integrated, consistent, and enhanced user experience across the enterprise value chain to help businesses adapt to new market requirements.

- GDS EBITDA CAGR of 21% over FY20-22E: We have not increased our GDS revenue estimates, as we would wait to see signs of funnel turning into orderbook and revenue, which means there is an upside risk to our estimates. However, structurally, we see GDS margins remain high, and accordingly, we now see TCom's GDS EBITDA CAGR of 21% over FY20-22E (vs 2.3% CAGR over FY17-19).

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

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

General insurance - Fire, health remain growth drivers, rising Covid claims a concern - ICICI Securities

Supreme Industries - Perfect recipe for rerating; upgrade to BUY - ICICI Securities

Titan Company - Best positioned to gain from faster-than-expected recovery. Upgrade to ADD - ICICI Securities

Sector Update - Telecom - Sep 23, 2020 - ICICI Securities

Allcargo Logistics - Highlights of Blackstone deal - ICICI Securities

I-direct Instinct - Gokaldas Exports

Economy: RBI's trilemma: allows for INR strength - Kotak

HCL Technologies - Company Update - ICICI Securities

Chemcon Speciality Chemicals - IPO Review - ICICI Securities

Angel Broking - IPO Note - YES Securities

TCS - Announcement of its blockhchain based solutions on Microsoft Azure - Angel Broking

Amber Enterpirses acquire Sidwal - Angel Broking

Dixon Technologies - Buy - YES Securities

HCL Technologies acquisition of DWS Limited - Angel Broking

Allcargo Logistics CFO Resignation - Angel Broking

Upgrade to BUY on Gateway Distriparks - Strengthening the balance sheet - HDFC Securities

BUY on ITD Cementation - Execution pickup awaited - HDFC Securities

Allcargo Logistics - Trying to stich through an integrated offering - ICICI Securities

Polymer price tracker - Other polymer (ex-PVC) prices too firm up - ICICI Securities

Angel Broking - IPO Review - ICICI Securities

IPO Review - Computer Age Management Services - ICICI Securities

Company Update - EIH Ltd - ICICI Securities

Gladiator Stocks - Godrej Properties - ICICI Securities

Company Update - Dr Reddy's Laboratories - ICICI Securities

Gladiator Stocks: Pharma Thematic - ICICI Securities

Company Update - Housing & Urban Development - ICICI Securities

Covid Recovery Pulse - E-Way bill generation shows recovery signs with auto volumes flat - ICICI Securities

Quant Pick - UltraTech Cement - ICICI Securities

Lupin & Cipla - Positive News - Angel Broking

Sterling and Wilson Solar Ltd - 106.71 MW order win - Angel Broking

Dr. Reddy's Laboratories - Settles Revlimid litigation in US - ICICI Securities

Natco Pharma - Natco to launch first generic Revlimid - ICICI Securities

Solar Industries - Overseas and defence key to profitability - ICICI Securities

Federal Bank - Strengthening liability muscle; fees & charges revised upwards - ICICI Securities

HCL Technologies Mr. Jyoti Roy, DVP - Equity Strategist, Angel Broking Ltd


I-direct Instinct - Intellect Design Arena

P&G Health - Company Update - ICICI Securities

Relaxo Footwears - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Bata India - Mr. Amarjeet Maurya- AVP - Mid Caps, Angel Broking Ltd

Listing of Happiest Minds Technologies - Angel Broking

Dr. Reddy's Lab - Sep 17, 2020 - Angel Broking

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019