Prabhudas picks: Tulip Telecom Services
Prabhudas has maintained ‘buy’ rating on the stock for a target price of Rs 1,317. Tulip Telecom Services reported very strong quarterly revenue, year on year growth of 42 per cent.
By ET Online |
Target price: Rs 1,317
Recommendation: Buy
Prabhudas has maintained ���buy��� rating on the stock for a target price of Rs 1,317. Tulip Telecom Services reported very strong quarterly revenue, year on year growth of 42 per cent and quarter on quarter growth of 25 per cent to Rs 414.7 crore, primarily boosted by data/corporate service revenue.
It added 23,366 connects during the quarter (highest ever) with almost flattish installation charges of Rs 42k/connect. The company has expanded its reach to 1200 cities vis-��-vis its key competitors who reach around 150-200 top cities.
Margins fell by 40 basis points quarter on quarter and rose by 360 basis points year on year to 19.9 per cent, primarily due to increase in cost of goods sold in the quarter. This was due to Haryana SWAN project, which the company has submitted to the Haryana government for which billing is yet to start.
Contribution of high margin data segment grew to 56 per cent of overall revenue for this quarter as compared to 42 per cent a year ago, primarily aided by higher recurring revenue from old clients.
At the market price of Rs 1,028, the stock trades at 12.6x FY09E EPS of Rs 82 and at 10.2x FY10E EPS of Rs 101. Prabhudas remains positive on the future growth prospects of Tulip.
Recommendation: Buy
Prabhudas has maintained ���buy��� rating on the stock for a target price of Rs 1,317. Tulip Telecom Services reported very strong quarterly revenue, year on year growth of 42 per cent and quarter on quarter growth of 25 per cent to Rs 414.7 crore, primarily boosted by data/corporate service revenue.
It added 23,366 connects during the quarter (highest ever) with almost flattish installation charges of Rs 42k/connect. The company has expanded its reach to 1200 cities vis-��-vis its key competitors who reach around 150-200 top cities.
Margins fell by 40 basis points quarter on quarter and rose by 360 basis points year on year to 19.9 per cent, primarily due to increase in cost of goods sold in the quarter. This was due to Haryana SWAN project, which the company has submitted to the Haryana government for which billing is yet to start.
Contribution of high margin data segment grew to 56 per cent of overall revenue for this quarter as compared to 42 per cent a year ago, primarily aided by higher recurring revenue from old clients.
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Tulip added 65,800 connects for 2007-08, which is quite promising. The company has further hinted that the connects by existing customers are growing and so is their bandwidth requirements. This clearly indicates that there is little or no competition till now. Tulip is looking to diversify into managed services, SWAN projects and data centres to de-risk itself from any significant competition, which the market fears from telcos in the next 6-9 months.At the market price of Rs 1,028, the stock trades at 12.6x FY09E EPS of Rs 82 and at 10.2x FY10E EPS of Rs 101. Prabhudas remains positive on the future growth prospects of Tulip.
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