Motilal Oswal Remains 'Neutral' On Tata Communications Shares Post Subdued Q1 Results — Here's Why

Tata Communications’ Q1 results were subdued, with ~1% QoQ growth in data revenue and consolidated Ebitda. Tata Communications’ consolidated Ebitda came in ~4% below estimate, as data Ebitda margin contracted further ~30bp QoQ to 17.2% (-250bp YoY, 90bp miss) due to lower net revenue and rising salience of the lower-margin digital business..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Motilal Oswal Report.We currently model ~13% CAGR in digital revenue over FY25-28 and expect digital to account for ~54% of Tata Communications Ltd.'s data revenue by FY28 (vs ~49% currently). Acceleration in digital revenue remains key for re-rating.We lower our FY26-28E revenue by ~2-3% each and believe Tata Communications’s ambition of doubling data revenue by FY28 remains a tall ask without further acquisitions. Overall, we build in ~8% data revenue CAGR over FY25-28, with data revenue reaching INR248b by FY28 (vs. Tata Communications’s ambition of Rs 280 billion). We lower our FY26-27E Ebitda by ~2-3% each and believe that margin expansion to 23-25% by FY28 could be challenging, given the rising share of inherently lowermargin businesses in Tata Communications’ mix amid weakness in core connectivity.We ascribe 9.5X Sep’27E EV/Ebitda to the data business and 5X EV/Ebitda to voice and other businesses. We ascribe an Rs 30 billion (or Rs 106/share) valuation to Tata Communications’ 26% stake in STT data centers to arrive at our revised target price of Rs 1,675. After significant time correction (Tata Communications: +10% over the last two years, vs 30% for BSE 100), the stock still trades at ~12x one-year forward EV/Ebitda (~15% premium to the LT average). We reiterate our Neutral rating as we await sustained acceleration in data revenue growth, along with margin expansion, before turning more constructive on Tata Communications..Click on the attachment to read the full report:.'Buy' Hindustan Zinc Shares, Maintains Dolat Capital Post Q1 Results — Here's Why.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Motilal Oswal Remains 'Neutral' On Tata Communications Shares Post Subdued Q1 Results — Here's Why

Motilal Oswal reiterates Neutral rating on Tata Communications, cuts target price

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