The shares of a Telecomm company, specializing in being a global digital ecosystem enabler, offering network solutions, cloud services, and connected solutions to help businesses transform digitally are in focus after brokerage company JM Financials initiated a Buy Target on it with a nearly 35 percent Upside Potential.
Price action
With a market capitalization of Rs. 44,558.33 crores on Wednesday, the shares of Tata Communications Ltd jumped upto 4.8 percent making a high of Rs. 1578.45 per share compared to its previous closing price of Rs. 1505.40 per share.
What Happened
Tata Communications Ltd engaged in being a global digital ecosystem enabler, is in focus after JM Financials initiated a “Buy” target price of Rs. 2,030 with an upside of nearly 35 percent. The reasons for the “Buy” target
- Valuation Premium: JM Financial is valuing Tata Communications core data segment at 11 times the financial year 2027 Enterprise Value-to-EBITDA, which is a marginal premium over its historical valuation of 10.2 times.
- EBITDA Growth: This premium is justified by the expectation that the data segment’s EBITDA will grow at a compound annual Growth Rate (CAGR) of 21 percent from FY 2024-2028 and the company’s digital portfolio is expected to be a significant long-term growth driver.
- Growth Targets: Tata Communications has set growth targets for FY 2027, but JM Financial anticipates these may be delayed by a year due to global macroeconomic uncertainties. Alternatively, the company may take an inorganic growth approach to meet these targets.
- Key Risks: Key risks include a weak global economy, slower spending by businesses, and a negative ruling related to AGR (Adjusted Gross Revenue).
About the Company
Tata Communications is a global telecommunications and digital services provider, offering a wide range of solutions, including cloud, data centers, networking, and cybersecurity. Headquartered in Mumbai, India, It is a subsidiary of the Tata Group and plays a pivotal role in transforming digital connectivity and driving business innovation globally.
Future Outlook
Tata Communications Ltd seeks to increase the share of the DPS (Data and Professional Services) sub-segment in the DMS (Data Management Services) segment to 50 percent by FY27, through organic and inorganic expansion.
Financials
The company’s revenue rose by 3.23 percent from Rs. 5,644.74 crore to Rs. 5,826.8 crore in Q3FY24-25. Meanwhile, Net profit rose from Rs. 44.81 crore to Rs. 235.96 crore during the same period.
Written by Sridhar J
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