Tata Communications Q4 Results Review - Notwithstanding Near-Term Challenges: ICICI Securities

ICICI Securities Report

Tata Communications Ltd.’s Q4FY24 print missed our estimate with organic digital revenue growth of just 5% YoY; acquisition margin dipped 10% QoQ to 2%. Company anticipates near-term challenges to revenue growth, but remains confident of achieving the guidance shared for FY27E – double data revenue to Rs 280 billion, consolidated Ebitda margin in the range of 23-25% and return on equity of more than 25%.

Tata Communications has invested in people and platform but sees gaps in awareness for its services which may need additional investment in marketing. It has significantly enhanced its offerings to become relevant to global customers and expects high-margin enterprise segment revenue to grow.

We cut our FY25E/26E EPS by 18-24% factoring in lower margin expansion, but our target price reduces marginally to Rs 1,870 (from Rs 1,900) as we increase our FY26E price/earning multiple to 30 times (from 25 times). Downgrade to Hold (from Add).

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