This Small Cap IT Stock Can Jump 47%, “Buy” Says Top Brokerage House

Top broking house Yes Securities has a "buy" call on the stock of Tanla Platforms for an upside of as high as 47%. According to the brokerage, Tanla Platforms is a credible play on the rising demand for CPaaS solutions across industries for achieving enhanced customer engagement.

Buy the stock for a price target of Rs 1004 per share

According to Yes Securities an increase in smartphone penetration and greater regulatory push towards mandatory SMS alerts would drive CPaaS market.

"As per industry estimates, the Global CPaaS market is expected to grow at CAGR of 20% plus from CY20 to CY25E, led by faster adoption of multichannel communication. The adoption of CPaaS based A2P messaging across industries continues to drive volume growth for both enterprise and platform segments of Tanla. Rising share of higher margin platform segment would drive EBITDA margin of the company. We estimate revenue CAGR of 17.8% over FY23‐25E with average EBIT margin of 21.0% over the period.

We maintain our BUY rating on the stock with revised target price of Rs 1,004/share based on P/E of 18x on FY25E. The stock trades at P/E of 15.3x/12.3x on FY24E/FY25E," the brokerage has said.

Good corporate numbers

Tanla reported revenue of Rs 8,335 mn (down 4.2% QoQ, down 2.3% YoY) in a seasonally weak quarter. Enterprise revenue was down 4.1% YoY (down 5.0% QoQ), while Platform business grew 18.6% YoY (up 4.2% QoQ).

The gross margin for enterprise business grew from 17.9% in Q3FY23 to 20.0% in Q4FY23, while gross margin on Platform business remained flat at 96.0% for the quarter. EBITDA margin increased by 253 bps QoQ (down 165 bps YoY) to 19.9% for the quarter.

Cash & Cash Equivalents stood at Rs 7,116 million as of March 31, 2023, while the company also declared a dividend of Rs 4 per share.

Disclaimer

This is a recommendation of Yes Securities and not that of the author or Greynium Information Technologies Pvt Ltd. Readers should exercise caution and not take a decision based only on the article. We shall not be responsible for any losses and please consult a professional advisor.