Analyst's Pick: Tulip Telecom
Edelweiss rates Tulip Telecom (TTSL) as a 'Sector Outperformer' on a relative return basis.
By ET Bureau |
RESEARCH: EDELWEISS
RATING: BUY
CMP: Rs 909
Edelweiss rates Tulip Telecom (TTSL) as a 'Sector Outperformer' on a relative return basis. TTSL's Q2FY10 operating performance was above expectations, led by continued traction in the IP VPN segment that drove operating leverage and margin expansion.
Revenues jumped 11% q-o-q, led by 13% growth in IP VPN revenues, while EBITDA margin improved 140 bps to 25.9%. Revenues from the fibre business have commenced this quarter, and have contributed to higher realisation.
However, despite strong 17% EBITDA growth, higher taxes dampened net profit growth. During the quarter, TTSL repurchased FCCBs of face value $12 million at a discount, resulting in gain of Rs 7.36 crore; FCCBs worth $97 million are outstanding.
However, higher depreciation and taxes have neutralised the earnings impact and the earnings estimates, therefore, remain relatively unchanged. With a wide network footprint, Edelweiss sees continued traction in the IP VPN business, particularly with the recent fibre roll-out which is likely to enhance TTSL's addressable market.
At Rs 906, the stock is trading at a P/E of 9.5x and 9x and EV/EBITDA of 6.7x and 5.5x for FY10E and FY11E, respectively.
RATING: BUY
CMP: Rs 909
Edelweiss rates Tulip Telecom (TTSL) as a 'Sector Outperformer' on a relative return basis. TTSL's Q2FY10 operating performance was above expectations, led by continued traction in the IP VPN segment that drove operating leverage and margin expansion.
Revenues jumped 11% q-o-q, led by 13% growth in IP VPN revenues, while EBITDA margin improved 140 bps to 25.9%. Revenues from the fibre business have commenced this quarter, and have contributed to higher realisation.
However, despite strong 17% EBITDA growth, higher taxes dampened net profit growth. During the quarter, TTSL repurchased FCCBs of face value $12 million at a discount, resulting in gain of Rs 7.36 crore; FCCBs worth $97 million are outstanding.
However, higher depreciation and taxes have neutralised the earnings impact and the earnings estimates, therefore, remain relatively unchanged. With a wide network footprint, Edelweiss sees continued traction in the IP VPN business, particularly with the recent fibre roll-out which is likely to enhance TTSL's addressable market.
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At Rs 906, the stock is trading at a P/E of 9.5x and 9x and EV/EBITDA of 6.7x and 5.5x for FY10E and FY11E, respectively.
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