Why ICICI Securities is bullish on this Tata Group stock, raises target price

06 Aug , 2021 By : Kanchan Joshi

Domestic brokerage and research firm ICICI Securities has maintained its Buy rating on the Tata Group's telecommunications arm, Tata Communications and has raised its target price on the telecom stock as it expects un-lockdown to help in faster closure of sale funnel and deal execution along with rise in usage-based revenue adding to growth for the company.

The brokerage said that Tata Comm remains confident of revenue growth from winning smaller deals, which are bundled service with little customisation and can have quick turnaround. These deal make same margins for TCom; and usage-based revenue contributes 25% of data revenue, which has significantly moderated. Unlocking is helping drive usage-based revenue, which will add to growth, the note said.

Tata Communications’ Q1FY22 EBITDA (excluding real estate revenue) came in below ICICI Securities' estimates, and was impacted by provisioning for license fees on pure internet. ''..However, TCom continues to hold on to high margins, which is comforting. It remains confident of delivering higher revenue growth next quarter onwards. It is likely to see significant traction in H2FY22. TCom is now aggressively pursuing small deals for quicker turnaround of revenue without diluting margins,'' ICICI Securities added. The brokerage has revised its target price upwards to Rs1,750 per share from Rs1,671.

Tata Communications on Wednesday posted about 15% jump in consolidated profit at Rs296 crore in the quarter ended June 2021. The company had a profit of Rs257.8 crore in the same quarter a year ago. The consolidated revenue declined by about 7% to Rs4,103 crore during the reported quarter as compared to Rs4,403 crore in the corresponding quarter of 2020-21.

"In a challenging quarter impacted by the second wave of COVID-19, we have delivered a robust performance. The global markets are slowly opening up and we are witnessing greenshoots of demand recovery," Tata Communications Managing Director and CEO A S Lakshminarayanan said in a statement.