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Motilal Oswal Report
We attended Tata Communications Ltd.'s analyst meet where the management shared its ‘product-to-platform' go-to-market strategy by leveraging capabilities for accelerated growth. The key highlight of the event was an ambitious revenue target. The company aspires to double its revenue in the next four years. Please find below the key takeaways:
Upping the ante, management stated its ambition to double data revenue to Rs 280 billion over FY23-27E (at 19% compound annual growth rate) versus previous guidance of double-digit growth.
This will require higher capex and opex. Management provided $300 million capex guidance in FY24E. This should increase with 10-12% capex-to-sales range beyond FY24E.
Further, Ebitda margin guidance is maintained at 23-25% versus 24.2% in FY23; however, Tata Communications indicated that the recent acquisition of The Switch Enterprise may moderate margin below the guidance range in FY24E.
Management maintained that it will continue to focus on balance sheet discipline with more than 25% return on capital employed and less than two times net debt to Ebitda.
We have factored in revenue/Ebitda compound annual growth rate of 12%/10% over FY23-25E versus 1%/10% over FY20-23 as many of the growth categories still remain in their early stages with longer gestation period.
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