Buy Tulip Telecom; target of Rs 189: ICICIdirect.com

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Buy Tulip Telecom; target of Rs 189: ICICIdirect.com

ICICIdirect.com is bullish on Tulip Telecom and has recommended buy rating on the stock with a target of Rs 189 in its May 16, 2011 research report.

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ICICIdirect.com is bullish on Tulip Telecom and has recommended buy rating on the stock with a target of Rs 189 in its May 16, 2011 research report.

"Tulip Telecom reported Q4FY11 numbers which were in line with our estimates with top line at Rs 638.0 crore against our expectation of Rs 631.8 crore, registering a growth of 20.2% YoY and 5.9% QoQ. EBITDA for the quarter stood at Rs 186.6 crore at 29.3% of revenue, growing 20.8% YoY. PAT stood at Rs 82.7 crore against our expectation of Rs 76.5 crore. Interest cost rose sharply by 44.6% QoQ to Rs 26.7 crore on account of increase in total debt from Rs 1219.1 crore in Q4FY10 to Rs 1776.9 crore in Q4FY11."

"The company continues to see high traction on the newly laid fibre optic cable business, with about 80% of the new orders received in Q4FY11 were on fibre optic. The company also added various new clients in this quarter which include Apex Bank Assam, MRF, GMR Group, HP India, Honeywell and Biocon. Tulip Telecom won order worth Rs 21 crore under Managed Service category from Apex Bank, Assam for Core Banking Solution and an additional R-APDRP project worth Rs 32 crore order in Andhra Pradesh."

"The company's recent venture into fibre optic business has shown good traction with 80% of new orders coming on the Fibre network. The company is also upbeat on the newly acquired Data Centre facility. We have estimated utilization level of ~30% in data center business in FY13. We estimate 19.0% CAGR (FY11-13E) in revenue to Rs 3327.4 crore in FY13, while the PAT is expected to grow 12.5% CAGR over same period to Rs 387.7 crore. At the current market price of Rs 164 the stock is trading at 6.9x FY13E diluted EPS of Rs 23.6. We value the stock 8x FY13E EPS and arrive at a target price of Rs 189; this implies an upside of 15%. We maintain our rating as BUY on the stock," says ICICIdirect.com research report. 

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