Buy Tata Communications, target price Rs 1600: ICICI Securities

ICICI Securities has buy call on Tata Communications with a target price of Rs 1600. The current market price of Tata Communications is Rs 1179.2. Time period given by analyst is one year when Tata Communications Ltd. price can reach defined target.

Tata Communications Ltd., incorporated in the year 1986, is a Mid Cap company (having a market cap of Rs 33758.25 Crore) operating in Telecommunications sector.

Tata Communications Ltd. key Products/Revenue Segments include Telecommunication Services for the year ending 31-Mar-2021.



Financials
For the quarter ended 31-03-2022, the company reported a Consolidated Total Income of Rs 4526.55 Crore, up 7.68 % from last quarter Total Income of Rs 4203.69 Crore and up 9.58 % from last year same quarter Total Income of Rs 4130.95 Crore. Company reported net profit after tax of Rs 366.21 Crore in latest quarter.


Investment Rationale
Tata Communications’ (TCom) Q4FY22 data business net revenue grew only 5% YoY (+0.7% QoQ) which is below expectations. This should be partially weak from orderbook of Q3; while orderbook funnel has sequentially improved, management commentary does indicate gradual recovery in revenue growth. TCom revenue growth faced headwinds from fewer feet on the street, delay in decision making and under-performance of usage-based services. It is hopeful of acceleration in revenue in FY23; showing willingness to invest both in capex and opex to drive growth implies huge commitment. The brokerage should wait for early signs of an uptick in revenue. Data business EBITDA grew only 4.2% YoY (dipped 7.1% QoQ) on cost inflation including higher repair cost and reversal of covid benefits. It has cut EPS estimates by 5-12% over FY23-24E, and accordingly, reduced target price to Rs1,600 (from Rs1,680; 20x FY24E EPS).

Promoter/FII Holdings
Promoters held 58.86 per cent stake in the company as of 31-Mar-2022, while FIIs owned 19.38 per cent, DIIs 11.49 per cent.