Buy Tanla Platforms; target of Rs 1050: HDFC Securities

HDFC Securities' research report on Tanla Platforms

Tanla reported a revenue decline but the margin recovery in the enterprise segment came as a positive surprise. The enterprise revenue declined 5% QoQ, owing to seasonal and soft promotional volume but the platform revenue grew 4.1% QoQ led by Wisely Network and OTT platform. The enterprise business growth will be volume led and the proposed NLD rate hike will act as a booster. The platform segment growth will be powered by Wisely platforms. Wisely ATP (anti-phishing product) is a promising product, which has received Sandbox approval from TRAI and is under POC with large banks. Wisely Network and OTT (WhatsApp) have started yielding results, while Wisely Communicate (encrypted OTP) and Wisely Engage (performance marketing) are future drivers. The EBITDA margin has recovered >20% levels in Q4, given price negotiations with telcos and reduced input costs. We are building in improved margins for FY24E and revised our EPS estimate upward by 2.6/3.3% for FY24/25E.

Outlook

We maintain our BUY rating with a TP of INR 1,050, based on 22x Dec-24E EPS, supported by a 23% EPS CAGR over FY23-25E and an RoE of ~31%. The stock is trading at 17x FY24E EPS (~34% below its 3Y average).

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