Tata Communications - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 1129; MCap - Rs. 32178 crore)

Tata Communication Q3FY21 performance was in line with sequential revenues weakness largely due to seasonality and COVID related weakness in deal conversion. Margins also normalised as last quarter had certain one-offs.

Q3FY21 earnings summary

- Topline came in at Rs. 4223 crore, flattish YoY & down 4% QoQ (tad lower than our estimates of 2.4% QoQ decline). The data revenues (forming ~84% of the revenues) grew by 3.8% YoY (down 2.6% QoQ). The data revenues growth was driven by Traditional services revenue which grew by 6% YoY with traction from Enterprise and OTT segments. The Growth services, however, witnessed muted performance with revenues up 2.6% YoY, largely due to slower deal conversion in wake of business uncertainties due to COVID. Sequential decline of ~11% in growth services was due to seasonality and lower usage-based revenue due to holidays. Voice segment continued to remain weak with revenues down 16.6% YoY at Rs. 674 crore.

- Consolidated EBITDA came in at Rs. 1046 crore, up 37.5% YoY (tad lower our estimate of Rs. 1065 crore). The consequent margin was in line at 24.8% (up 678 bps YoY). We highlight that margins tapered off by 153 bps QoQ as Q2FY21 one-off gain of Rs. 43 crore and there was also an impact of Rs. 31 crore, due to timing difference of revenue & cost recognition in Voice segment. Data EBITDA margin was at 28.9%, up 800 Bps YoY (down 150 bps QoQ due to one-off impacts). Voice segment margins at 2.9%, was down 290 bps YoY due to timing difference as stated above.

- The company reported a PAT of Rs. 309 crore vs. expectations of Rs. 284 crore profit, with beat owing to lower depreciation and tax rate. Another key positive was sequential decline in debt by ~Rs. 659 crore, with Net Debt to EBITDA now at comfortable levels of 1.9x as compared to 2.9x in Q3FY20.

Tata Communication remains a key beneficiary of new normal of work from home, increased conferencing needs thereof and overall digitisation. We seek management commentary on the growth trajectory ahead. We will soon come up with an update post the conference call.

Shares of TATA COMMUNICATIONS LTD. was last trading in BSE at Rs.1129.95 as compared to the previous close of Rs. 1117.85. The total number of shares traded during the day was 18443 in over 1227 trades.

The stock hit an intraday high of Rs. 1143.55 and intraday low of 1095.8. The net turnover during the day was Rs. 20638244.

Source : Equity Bulls

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