This Digital Solutions Stock Has A Potential To Grow 22% In 1 Year: ICICI Direct

In the digital platforms and services segment of Tata Communications (TATCOM), revenue for the last quarter came in at Rs. 901 crore, up 5.2% QoQ and 6.7% YoY, which is a considerable good turn. Reputed brokerage firm ICICI Direct initiated a buy call for the stocks of TATCOM, for a 24% return, in 1 year.

Target Price

The Current Market Price (CMP) of Tata Communications is Rs. 1450. ICICI Direct has estimated a Target Price for the stock at Rs. 1775. The company is anticipated to give 22% return, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 1450
Target Price	Rs. 1775
1 year returns	22.00%

Company performance

In Q3FY22, the company's topline stood at Rs. 4185 crore, which was down 0.9% YoY and up 0.3% QoQ, led by data revenues (forming ~77% of the revenues) up 3.4% YoY and 3% QoQ at Rs. 3233 crore. Pick up in business and improvement across all segments helped the company here. Consolidated EBITDA stood at Rs. 1082 crore, up 3.5% YoY and down 2.7% QoQ. The consequent margin was 25.9%. Data EBITDA margin was at 32.2%, down 80 bps-QoQ. PAT was at Rs. 395 crore, up 28% YoY. Net debt at Rs. 7,189 crore, was down by Rs. 572 crore QoQ and Rs. 783 crore YoY.

Comments by ICICI Direct

Maintaining a buy rating, ICICI Direct said, "We expect ~7.3% revenue CAGR in FY21-24E in the overall data segment, driven by likely acceleration in growth from FY23 onwards. We expect overall margins to be at 25.9% in FY24 vs. 24.9% in FY21. The company's strategic growth plan, focused approach and structural improvement in data segment margins has driven multiple re-rating. While deal closures delays have had near term weakness in revenues, demand outlook is robust in the medium/long term and initial signs of recovery are visible, albeit moderately."

About the company

TATCOM enables the digital transformation of enterprises globally, including 300 of the Fortune 500 - unlocking opportunities for businesses by enabling borderless growth, boosting product innovation and customer experience, improving productivity and efficiency, building agility and managing risk. Tata Communications drives the next level of intelligence powered by cloud, mobility, Internet of Things (IoT), collaboration, security and network services. Tata Communications carries around 30% of the world's internet routes and connects businesses to 80% of the world's cloud giants and 4 out of 5 mobile subscribers.

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Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.