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ICICI Securities Report
Railtel Corporation of India's (Railtel) Q4FY23 EBITDA grew 2.0% YoY to Rs1bn; it was impacted by lower margins across businesses. However, easing supply chain has helped the company grow project revenue by 2.3x to Rs3.9 (up 57% in FY23). Telecom revenue has grown at 5.3% (+13% in FY23) to Rs3.1bn. Telecom margins have been hurt from higher O&M due to aging fibre which requires replacement and lower margin project execution. The company has guided for 1) telecom services revenue of Rs13-14bn for FY24 (Rs11.7bn in FY23); 2) projects revenue of Rs15bn for FY24 (vs Rs8bn in FY23) with EBIT margin of 6-7%; and 3) capex of Rs2bn to augment data centre capacity where it expects revenue to be 2x in FY24 to Rs1bn, and for other infrastructure expansion. Projects orderbook remains healthy at Rs45bn, and it has removed certain high-value projects such as RDN, COD and VSS in coaches. We cut our EPS estimates by 3-5% over FY24E-FY25E and target price to Rs140 (earlier: Rs145) with an unchanged FY25E PE multiple of 15x. Maintain BUY.
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