ICICI Direct is bullish on Tata Communications has recommended buy rating on the stock with a target price of Rs 880 in its research report dated August 02, 2020.
ICICI Direct's research report on Tata Communications
Tata Communication reported a better-than-expected performance on the operating front led by superior revenues and margins in the data segment. The topline was at Rs 4403 crore, up 5.6% YoY, 0.1% QoQ, led by superior data revenues (forming ~82% of revenues) that grew 9.9% YoY. EBITDA came in at Rs 1042 crore, up 26.2% YoY, with margins at 23.7% (up 385 bps YoY) driven by strong data margins of 27.1% (up 450 bps YoY), aided by structural cost efficiency (likely to remain) of ~Rs 100 crore (including moving of employee base in India) and Covid-19 led benefits (savings in travel costs, lower SG&A costs and concession from the government from international entities). The company reported a PAT of Rs 257.8 crore, up ~2.4x YoY.
We believe continued performance and deleveraging possibilities bode well for the company. Thus, we upgrade to BUY (vs. HOLD earlier) with a revised SoTP target price of Rs 880/share.
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