Buy Tata Communications, target price Rs 2,000: JM Financial

JM Financial has a buy call on Tata Communications with a target price of Rs 2,000. The current market price of Tata Communications is Rs 1607.15. The time period given by the analyst is a year when Tata Communications price can reach a defined target. Tata Communications, incorporated in 1986, is a Mid Cap company with a market cap of Rs 45830.85 crore, operating in the Telecommunications sector.

Tata Communications' key products/revenue segments include Telecommunication Services for the year ending 31-Mar-2024.



Financials
For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 6059.15 crore, up 3.99% from last quarter Total Income of Rs 5826.80 crore and up 5.40% from last year same quarter Total Income of Rs 5748.70 crore. The company has reported net profit after tax of Rs 1017.19 crore in latest quarter.

The company's top management includes Ms.Renuka Ramnath, Mr.A S Lakshminarayanan, Mr.Ankur Verma, Mr.N Ganapathy Subramaniam, Mr.Ashok Sinha, Mr.Krishnakumar Natarajan. Company has S R Batliboi & Associates LLP as its auditors. As on 31-03-2025, the company has a total of 28 Crore shares outstanding.


Investment Rationale
JM Financial has cut its FY26-FY27 revenue/EBITDA estimates by up to 1%, factoring in the 4QFY25 results; hence our target price is marginally cut to Rs 2,000 (from Rs 2,030). They are building in a robust ~24% data segment EBITDA CAGR over FY25?28E driven by a) strong growth in digital portfolio, positioned strongly across key megatrends like cloud, AI, IoT etc.; b) overall EBITDA margin improving from current ~20% to ~23% by FY27 (lower end of management guidance of 23%-25%) as operating leverage and acquisition synergies are likely to be partly offset by adverse revenue mix. Hence, the brokerage reiterated its BUY rating on Tata Communications with a revised target price of Rs 2,000/share, based on an 11x FY27 EV/EBITDA multiple for the data segment (vs. 5-year historical average of 10.4x). Key risks: a) weak global macro leading to deferment in discretionary tech spends; b) significant delay beyond FY27 to get to positive EBITDA margin in Digital portfolio segment; c) adverse AGR ruling.

Promoter/FII Holdings
Promoters held 58.86 per cent stake in the company as of 31-Mar-2025, while FIIs owned 16.99 per cent, DIIs 14.5 per cent.