Motilal Oswal's research report on Tata Communications
Tata Communications (TCOM) reported 1% growth QoQ in revenue (in line) and a 7% decline QoQ in EBITDA (9% miss) in 4QFY24 due to higher integration expenses. Adjusting for the acquisitions, data revenue and data EBITDA was flat QoQ. The management's endeavor to drive growth, including the loss-making acquisitions, has resulted in margin contraction. However, the long-term focus on margin-accretive growth remains intact. We estimate a CAGR of 14%/20% in revenue/EBITDA over FY24-26. At P/E of 22x and EV/EBITDA of 9.1x on FY26E, we see limited upside. We reiterate our Neutral rating on the stock.
Outlook
At P/E of 22x and EV/EBITDA of 9.1x on FY26E, we see limited upside. Margin improvement and data revenue growth should be the key catalysts for further valuation re-rating. We maintain our Neutral rating with a revised TP of INR1,910, assigning 10x/3x EBITDA to the Data/Voice businesses.
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