Multibagger debt-free stock gives 78% CAGR over 5 years: Should you buy?
Premium- Tanla Platforms Ltd. is a mid-cap company in the IT software industry with a market worth of Rs. 8,643.60 crores.
Tanla Platforms Ltd. is a mid-cap company in the IT software industry with a market worth of Rs. 8,643.60 crores. With more than 800 billion transactions per year, the firm is among the largest providers of cloud communication solutions in the world. The price of Tanla Platforms' shares has risen from 35.05 on August 4, 2017, to ₹634.50 currently, representing a multibagger return of 1,710.27 per cent over a period of five years and an approximate CAGR of 78.49 per cent. However, the stock has dropped 65.50 per cent YTD so far in 2022 and 31.60 per cent in the last year.
On the NSE, the stock had touched a 52-week-high of ₹2,096.75 on 17-January-22 and a 52-week-low of ₹584.50 on 27-July-22 which indicates that at the current price level of ₹634.50 the stock is trading at a discount of 69.73% from the 52-week-high and is above 8.55% above the 52-week-low, but what can be most appealing for the stock is Tanla Platforms Ltd currently holds a debt-free status as per Value Research. The stock had a total traded volume of 70,02,722 shares on the NSE today, with a traded value of 43,003.02 lacs. Tanla Platforms Ltd. has gained 8.42 per cent today and closed at ₹634.50, outpacing the S&P BSE IT Sector index's growth of 2.51 per cent.
The brokerage firm HDFC Securities has said in a note that “Tanla reported a weak quarter, revenue was down due to seasonality and margin dropped due to client-specific issues and higher competition. The enterprise business gross margin slipped 640bps to 16.4% (vs. our estimate of 100bps decline) due to a pricing cut in one large client, currency impact and higher technology investments. Revenue came in line, down 6.2% QoQ due to softness in the enterprise business (-4.2% QoQ) while the platform segment was stable (-1.0/+22.7% QoQ/YoY). The platform business will continue to deliver strong growth, with the ramp-up of Wisely (VI and Truecaller)."
“We expect the enterprise business to clock ~15% volume growth and the GM will be in the 18-19% range (vs 20-21% earlier) due to increasing competition. The platform business will clock 35% revenue CAGR, with ~90% GM. The management is confident about expanding the EBITDA margin to ~19-20% in the next two quarters. We are building in margin recovery but expect it to be lower than the historical level. We cut our EPS estimate by 10.6/9.1% for FY23/24E led by a ~200bps margin reset. We have a BUY rating with a TP of INR 1,040, based on 22x FY24E EPS (earlier 26x), supported by ~20% revenue CAGR and RoE of >40%. The stock is trading at 18.6/15.4x FY23/24E EPS (~40% lower than 5Y average)," said the research analysts of HDFC Securities.
On the other side, Yes Securities has said to buy the shares of Tanla Platforms for a target price of ₹1,218. The brokerage firm has said in a note that “We maintain BUY Rating on the stock with revised target price of ₹1,218 per share, based on 22x on FY24E EPS. We have reduced target PE multiple from 30x to 22x to account for lower margin assumption and higher cost of capital(WACC) in this environment of high macroeconomic uncertainty. Trades at PE of 13.2x on FY24E EPS."
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