Tata Communications Aims To Deliver Profitable Growth; Margin Expansion Goal Remains A Tall Ask— Motilal Oswal

Tata Communications has deferred its ambition of doubling data revenue to Rs 280 billion by one year to FY28, which implies a three-year CAGR of ~13% (vs ~19% CAGR target over FY23-27 earlier). The brokerage believes the revenue goal is more credible (vs FY23), though a tad optimistic and higher than estimate (~8.5% CAGR or Rs 250 billion by FY28)..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 a ~12% CAGR in digital revenue over FY25-28 and expect digital to account for ~51% of Tata Communications Ltd.’s data revenue by FY28 (vs ~48% in Q4 FY25). An acceleration in digital revenue remains key for re-rating. Our earnings estimates are unchanged. We believe Tata Communications would still fall short of its ambition of reaching Rs 280 billion in data revenue in FY28 without further acquisitions. Overall, we build in a ~9% data revenue CAGR over FY25-28, with data revenue reaching Rs 250 billion by FY28. We continue to believe management’s expectation of returning to 23-25% Ebitda range over the medium term remains a tall ask and build in a more gradual margin expansion to ~22% by FY28. We ascribe nine times June27E EV/Ebitda to Tata Communications' data business and 5X EV/Ebitda to voice and other businesses. We ascribe an Rs 30 billion (or Rs 104/share) valuation to Tata Communications 26% stake in STT data centers. Our SoTP-based target price remains unchanged at Rs 1,660. After significant time correction (5% return since 2023 analyst meet), the stock currently trades at reasonable 11.3x one-year forward EV/Ebitda (~10% premium to LT average). We reiterate our Neutral rating as we await acceleration in data revenue, along with margin expansion, before we turn more constructive..Click on the attachment to read the full report:.Pharma Q4 Results Review — India Traction Healthy; Post gRevlimid Uncertainty Looms, Says ICICI Securities.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.

Tata Communications Aims To Deliver Profitable Growth; Margin Expansion Goal Remains A Tall Ask— Motilal Oswal

Motilal Oswal reiterates Neutral rating as it awaits acceleration in data revenue, along with margin expansion, before turn more constructive.

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