Motilal Oswal's research report on Tata Communications
Weakness in TCOM’s earnings persisted, with a 3% QoQ fall in EBITDA (9% below our estimate), on lower Data usage. However, traction in FCF generation (INR26.2b) and deleveraging of the Balance Sheet continues (INR4.5b decline in net debt to INR67.4b) for third consecutive quarter. We have cut our FY23 EBITDA estimate by 4% to factor in 16% EBITDA CAGR over FY22-24, in anticipation of a recovery in usage-based revenue and new orders. Our estimates factor in risk from the continuation of the downward revision cycle as our expectation of double-digit earnings growth is largely dependent on the Digital platform and Services, which contribute 20% to total revenue, and has grown at 10% over the last three years. We maintain our Neutral rating.
We maintain our Neutral rating with a TP of INR1,340/share (assigned 9x/3x EBITDA to the Data/Voice business).
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