The shares of this Tata group-backed company is in focus after CLSA has initiated a buy coverage for this stock. In this article, we will look at what CLSA thinks of this company.
With a market capitalization of Rs 48,711 crores, the shares of Tata Communications Ltd are currently trading at Rs 1,709 per share, down by 21.42 percent from its 52-week high of Rs 2,175 per share. Over the past five years, the stock has delivered a return of 251 percent.
CLSA, the global brokerage headquartered in Hong Kong, has assigned an Outperform rating on Tata Communications with a target price of Rs 2,100, signalling an upside of 23 percent from its current level.
The company confirmed its EBITDA margin forecast of 23–25 percent and Return on Capital Employed (ROCE) target of 25 percent, and is thus exhibiting confidence in sustainable and scalable profitability.
Brokerage firm CLSA observed that this outlook suggests an 18 percent consolidated EBITDA CAGR, which is above its existing estimate of 15 percent CAGR to Rs 6,900 crore by FY28, as noted in a report. The brokerage mentioned that there is potential value unlocked from the ongoing project to monetize surplus land assets.
Tata Communications is also seeing strong momentum in STT GDC, its data centre joint venture with ST Telemedia, with the continued growth in adoption of cloud and enterprise storage solutions.Additionally, Nuvama also set a target of Rs 2,000, despite the deferral of revenue target, signalling an upside potential of 17 percent.
Financial Highlights
The company reported a revenue of Rs 23,109 crore in FY25, up by 10.20 percent from its FY24 revenue of Rs 20,969 crore. Coming to its profitability, the company reported a net profit surge of 89 percent to Rs 1,837 crore in FY25 from Rs 970 crore in FY24.
The stock delivered an ROE and ROCE of 47.34 percent and 14.82 percent respectively, and is currently trading at a P/E of 42.82x as compared to its industry average of 42.90x.
Tata Communications is a global telecommunications and digital infrastructure company; it is a provider of voice, data, cloud communications, cybersecurity, the Internet of Things (IoT), and network services.
The company also provides management services for banks, such as ATM deployment and POS solutions. The global organization operates both revenue and service lines in voice, data, payments (payfort), and real estate services both enterprises and service providers.
Written by Satyajeet Mukherjee
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