Buy Tata Communications, Target Price Rs 1810: ICICI Securities

Broking firm, ICICI Securities has recommended buying the stock of Tata Communications with a price target of Rs 1570 in its latest report dated June 29, 2023.

Tata Communications (TCom) has agreed to acquire Kaleyra, a US-based omnichannel integrated CPaaS player for enterprise value of $250 million (0.73x CY22 sales). "This is likely to enhance Tata Communication's global position in CPaaS services (which is growing at 25% CAGR as per Juniper), and with The Switch acquisition, TCom's position in the US may become stronger. Strong digital businesses in the US can assist Tata Communications to cross sell other products, thereby, improving market share in core connectivity and Digital services. It aims to grow data revenue by 2x to Rs 280 billion by FY27," ICICI Securities has stated in its latest report.

Buy the stock with a target price of Rs 1810

According to the brokerage, the loss-making acquisition may drag EBITDA margin down in the near term; however, TCom aims to reach 23-25% margin in the medium term. "Its balance sheet remains healthy, and the acquisition is unlikely to deteriorate the position. We have not baked in the acquisition in our estimates, and with increasing revenue outlook, we increase our valuation multiple (PE) to 24x (from 22x) FY25E, and accordingly raise target price to Rs 1,810 (from Rs 1,665). Maintain BUY," the brokerage has said.

Disclaimer

The above recommendation is picked from the report of ICICI Securities and is not a recommendation of either the author, nor Greynium Information Technologies. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.