Buy Tanla Platform; target of Rs 1004: YES Securities

YES Securities' research report on Tanla Platform

Tanla Platform (TANLA) reported mixed financial performance for the quarter. The sequential revenue growth was below estimates; while EBITDA margin was inline with expectation. It reported sequential revenue decline of 4.2% QoQ, led by 5.0% QoQ decrease in the revenue of Enterprise business and 4.2% QoQ increase in revenue of Platform business. Trubloq processed 83bn message in Q4 with more than 60% volume market share. There was sequential increase in EBITDA margin(up 253 bps QoQ) led by improvement in the gross margin of enterprise business. It is a credible play on the rising demand for CPaaS solutions across industries for achieving enhanced customer engagement. Also, increase in smartphone penetration and greater regulatory push towards mandatory SMS alerts would drive CPaaS market. As per industry estimates, the Global CPaaS market is expected to grow at CAGR of 20% plus from CY20 to CY25E, led by faster adoption of multichannel communication. The adoption of CPaaS based A2P messaging across industries continues to drive volume growth for both enterprise and platform segments of Tanla. Rising share of higher margin platform segment would drive EBITDA margin of the company.

Outlook

We estimate revenue CAGR of 17.8% over FY23‐25E with average EBIT margin of 21.0% over the period. We maintain our BUY rating on the stock with revised target price of Rs 1,004/share based on P/E of 18x on FY25E. The stock trades at P/E of 15.3x/12.3x on FY24E/FY25E.

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