Buy Tejas Networks; target of Rs 1100: Emkay Global Financial

Emkay Global Financial's research report on Tejas Networks

Tejas Networks reported a beat on our revenue and margin estimates, led by BSNL’s 4G project execution. We see Tejas benefits chiefly from: 1) GoI emphasis on domestic manufacturing and the PLI scheme; 2) large spends on BSNL, BharatNet, and the Railways; 3) references from TCom and TCS, thus adding new clients; and 4) global move towards replacing Chinese telecom equipment. We expect FY25E revenue to be 4x FY24 revenue on BSNL and Bharatnet execution. We increase revenue by 6%/7% for FY25E/FY26E on account of the beat on our revenue estimate. We also raise our EBITDA margin by 150-10bps on the margin beat.

Outlook

We revise our TP to Rs1,100/share (21% upside) vs. Rs975 earlier, based on DCF methodology (WACC: 10.5%; Terminal growth rate: 6%). We retain our BUY rating.