Buy Tanla Platforms, target price Rs 1040: HDFC Securities
Tanla Platforms Ltd., incorporated in the year 1995, is a Small Cap company (having a market cap of Rs 9917.57 Crore) operating in IT Software sector.
By ETMarkets.com | Updated:
Agencies
HDFC Securities has buy call on Tanla Platforms with a target price of Rs 1040. The current market price of Tanla Platforms Ltd. is Rs 663.75. Time period given by analyst is one year when Tanla Platforms Ltd. price can reach defined target.
Tanla Platforms Ltd., incorporated in the year 1995, is a Small Cap company (having a market cap of Rs 9917.57 Crore) operating in IT Software sector.
Tanla Platforms Ltd. key Products/Revenue Segments include Software Services for the year ending 31-Mar-2021.
Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 804.64 Crore, down -6.18 % from last quarter Total Income of Rs 857.64 Crore and up 27.58 % from last year same quarter Total Income of Rs 630.68 Crore. Company reported net profit after tax of Rs 100.41 Crore in latest quarter.
Investment Rationale
Tanla reported a weak quarter, revenue was down due to seasonality and margin dropped due to client-specific issues and higher competition. The enterprise business gross margin slipped 640bps to 16.4% (vs. our estimate of 100bps decline) due to a pricing cut in one large client, currency impact and higher technology investments. Revenue came in line, down 6.2% QoQ due to softness in the enterprise business (-4.2% QoQ) while the platform segment was stable (-1.0/+22.7% QoQ/YoY). The platform business will continue to deliver strong growth, with the ramp-up of Wisely (VI and Truecaller). The brokerage expects the enterprise business to clock ~15% volume growth and the GM will be in the 18-19% range (vs 20-21% earlier) due to increasing competition. The platform business will clock 35% revenue CAGR, with ~90% GM. The management is confident about expanding the EBITDA margin to ~19-20% in the next two quarters. The brokerage are building in margin recovery but expect it to be lower than the historical level. It cuts EPS estimate by 10.6/9.1% for FY23/24E led by a ~200bps margin reset. It has a BUY rating with a TP of INR 1,040, based on 22x FY24E EPS (earlier 26x), supported by ~20% revenue CAGR and RoE of >40%. The stock is trading at 18.6/15.4x FY23/24E EPS (~40% lower than 5Y average).
Promoter/FII Holdings
Promoters held 43.74 per cent stake in the company as of 30-Jun-2022, while FIIs owned 14.83 per cent, DIIs 1.4 per cent.
Tanla Platforms Ltd., incorporated in the year 1995, is a Small Cap company (having a market cap of Rs 9917.57 Crore) operating in IT Software sector.
Tanla Platforms Ltd. key Products/Revenue Segments include Software Services for the year ending 31-Mar-2021.
Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 804.64 Crore, down -6.18 % from last quarter Total Income of Rs 857.64 Crore and up 27.58 % from last year same quarter Total Income of Rs 630.68 Crore. Company reported net profit after tax of Rs 100.41 Crore in latest quarter.
Investment Rationale
Tanla reported a weak quarter, revenue was down due to seasonality and margin dropped due to client-specific issues and higher competition. The enterprise business gross margin slipped 640bps to 16.4% (vs. our estimate of 100bps decline) due to a pricing cut in one large client, currency impact and higher technology investments. Revenue came in line, down 6.2% QoQ due to softness in the enterprise business (-4.2% QoQ) while the platform segment was stable (-1.0/+22.7% QoQ/YoY). The platform business will continue to deliver strong growth, with the ramp-up of Wisely (VI and Truecaller). The brokerage expects the enterprise business to clock ~15% volume growth and the GM will be in the 18-19% range (vs 20-21% earlier) due to increasing competition. The platform business will clock 35% revenue CAGR, with ~90% GM. The management is confident about expanding the EBITDA margin to ~19-20% in the next two quarters. The brokerage are building in margin recovery but expect it to be lower than the historical level. It cuts EPS estimate by 10.6/9.1% for FY23/24E led by a ~200bps margin reset. It has a BUY rating with a TP of INR 1,040, based on 22x FY24E EPS (earlier 26x), supported by ~20% revenue CAGR and RoE of >40%. The stock is trading at 18.6/15.4x FY23/24E EPS (~40% lower than 5Y average).
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Promoter/FII Holdings
Promoters held 43.74 per cent stake in the company as of 30-Jun-2022, while FIIs owned 14.83 per cent, DIIs 1.4 per cent.
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