ICICI Securities research report on Tata Communications
Tata Communications’ (TCom) Q4FY22 data business net revenue grew only 5% YoY (+0.7% QoQ) which is below expectations. This should be partially weak from orderbook of Q3; while orderbook funnel has sequentially improved, management commentary does indicate gradual recovery in revenue growth. TCom revenue growth faced headwinds from fewer feet on the street, delay in decision making and under-performance of usage-based services. It is hopeful of acceleration in revenue in FY23; showing willingness to invest both in capex and opex to drive growth implies huge commitment. We would wait for early signs of an uptick in revenue. Data business EBITDA grew only 4.2% YoY (dipped 7.1% QoQ) on cost inflation including higher repair cost and reversal of covid benefits.
We have cut our EPS estimates by 5-12% over FY23-24E, and accordingly, reduced our target price to Rs1,600 (from Rs1,680; 20x FY24E EPS). Maintain BUY.
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