Tata Communications shares have plummeted over 38 per cent so far this year. The Tata Group company stock tanked 7 per cent to hit a 52-week low of Rs 856 in the previous session after the firm held an investor meet for June 2022. Ace investor Rakesh Jhunjhunwala’s wife Rekha owns 1.08% stake in the company. According to the shareholding pattern of Tata Communications for the quarter ended March 2022, Rekha Jhunjhunwala owned 30,75,687 shares of the company. Despite the steep correction in the stock in the past three quarters, analysts have a positive outlook on the stock, and see up to 42 per cent potential rally going forward.
Emkay Global: Buy
Target price: Rs 1,155; Upside: 32%
Analysts at Emkay Global highlighted that in the last two years, although Tata Communication has delivered on its financial fitness goals, revenue recovery has seen a delay. “As we have highlighted in our past reports, double-digit revenue growth is essential for sustaining a re-rating. Amid these challenges, the stock saw a 30% correction after Q4FY22 results. We believe the stock will remain range-bound until TCOM is able to achieve sustainable double-digit revenue growth in the Data segment. The only positive is strong FCF generation despite higher capex spends,” they said.
The brokerage maintained a ‘Buy’ call on the stock, saying, “We cut target multiple for Data segment to 8x (Jun’24E EBITDA) from 10.5x and arrive at a revised SOTP based TP of Rs 1,155.”
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Target price: Rs 1,250; Upside: 42%
According to the brokerage report, Tata Communications is the leading global digital ecosystem enabler which provides its clientele with state-of-the-art solutions, including a wide range of communication, collaboration, cloud, mobility, connected solutions, network and data centre services. ICICIDirect analysts have a positive outlook on the stock. “We maintain BUY on the company. We value TCom at a target price of Rs 1250 as we lower our target multiple to 20x from 24x earlier, amid higher cost of capital in rising interest rate regime,” they said.
IIFL Securities: Add
Target price: Rs 1,037; Upside: 18%
The brokerage report stated that Tata Communication’s 2022 Investor Meet showcased its capabilities in the IoT, cloud, CPaaS and media verticals. While TCOM reiterated its aspiration to grow revenue by double-digits in the medium-to-long term, it refrained from providing FY23 revenue guidance, even as it called out the slower conversion of order book into revenue. “It would also continue re-investing in the business, thereby limiting Ebitda margin and ROCE expansion in the near-term. We continue to build-in 11% EPS decline in FY23, followed by 25% Cagr in FY24 and FY25. We cut TP to Rs1,037 on lower multiple. We maintain ADD in the absence of near-term triggers,” said IIFL Securities in its note.
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