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ICICI Securities Report
Tata Communications Ltd. has shared an upbeat revenue growth outlook for FY23-27E in its investor meet (on June 7, 2023). The company expects its data revenue to grow by two times to Rs 280 billion by FY27 at a revenue compound annual growth rate of 18%.
This will be driven by less than 35% growth in its digital services revenue during the same period, and its mix will rise to more than 50%. This is a significant acceleration in digital services revenue growth versus 19% in the past three years, and data revenue growth which was under 10%.
It expects international revenue to grow faster where it has good lead indicators. Despite the rise in low margin digital services, company anticipates Ebitda margin to be stable at 23-25%, with return on capital employed more than 25%.
We believe acceleration in revenue may start showing in the next 12-18 months as the company reaps benefits of the rise in execution of order wins, and international business starts firing.
We are yet to factor The Switch acquisition in our estimates, and our data revenue growth forecast is conservative at 12% over FY23-25E.
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