Emkay Global
Tata Communications (Buy)
Target: ₹1,480
CMP: ₹1,260.70
In its analyst meet today, Tata Communications management echoed its six key platforms (growth pillars) for revenue growth while continuing to highlight the emphasis on higher wallet share mining in Top-1,000 customers (out of 5,000+ customers) through targeted initiatives.
Its strategy to become a holistic solutions provider is moving in the right direction. Growth will be driven by deeper client engagement, new solution launches, focus on fixed + usage-based revenue model for digital platforms and tactical inorganic opportunities.
After meeting 2 of the 3 financial targets outlined last year, it has upped RoCE goal to 25-30 per cent in the medium term from 20 per cent, with the EBITDA margins in the range of 23-25 per cent. Capex intensity would rise with incremental growth opportunities, without diluting RoCE. Although near term challenges persist on account of Covid-19, we are expecting revenue recovery in H2-FY22.
In order to stay relevant in customer’s digital journey, the management reinforced five drivers: pursuing borderless growth; boosting product innovation and customer experience; enhancing productivity and efficiency (simplification of network landscape); building agility (more on-demand solutions, automation and self-control of the networks operations through digitisation); and managing risk.