Tata Communication Can Rally 34%, Says ICICI Securities As It Double Upgrades The Stock To 'Buy' — Here's Why

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ICICI Securities Report

We upgrade Tata Communications Ltd. two notches to Buy (from Hold). Tata Communications' stock price has plunged notably beset by near-term revenue weakness – making the company’s revenue guidance seem rather ambitious.

In our view, this presents strong upside potential and compelling risk-reward. In FY24, Tata Communications was worsen by a cable cut in the Red Sea and weak order book growth. With the Red-sea issue now behind and double-digit FY25–TD order book growth, the company’s data revenue growth will likely swell.

We believe Tata Communications' strong digital product portfolio aside, Street is yet to bake in Rs 33 billion of FY27E free cash flow generation (Ebitda minus capex) in core connectivity (7.2% of EV).

Notably, Tata Communications has launched many products serving cloud ecosystem – shall benefit from its adoption. Also, the company has been agile in embedding artificial intelligence in internal process/services – these upfronted investments/potential are undervalued.

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