ICICI Securities Assigns Buy On Midcap Tata Stock For 22% Gains, Board Recommends Rs 21 Dividend

Brokerage firm ICICI Securities has come up with a "Buy" call on Tata Telecommunications Ltd. (TCom) for a target price of Rs 1,510 apiece. Given the target price by the brokerage firm, the stock is likely to give up to 22% potential gains. Tcom is a Tata Group telecommunications sector midcap company having a market capitalisation of Rs 35,365.65 crore. On April 19, 2023, Tcom recommended a final dividend of Rs 21/share for the financial year 2022-23.

Stock Performance and Returns

The last traded share price of Tcom on NSE is Rs 1,240.90 apiece, up 0.70% from the previous close. The stock touched its 52 week low on 15 June 2022 at Rs 856.25 apiece and 52 week high on 12 January 2023 at Rs 1,430.60 apiece.

The stock declined 1.99% in the past 1 week and gained 2.23% in the past 1 month. It declined 3.21% in 1 year. Whereas, in the past 3 years it gave a robust 238.67% positive return. In 5 years it has given 97.16% positive return.

Recommended a Final Dividend of Rs 2/share

In its regulatory filing on April 19, 2023, the company said, "we would like to inform you that the Board of Directors has recommended a final dividend of ₹21.00 per share of the face value of Rs.10 each for the financial year ended March 31, 2023. This dividend, upon approval of the shareholders, shall be paid to eligible shareholders after conclusion of the ensuing Annual General Meeting."

Confident on delivering sustainable growth, Buy for a target price of Rs. 1,510/share

According to the brokerage firm, Tata Communications' (TCom) Q4FY23 data revenue grew 2.2% QoQ / 11.2% YoY sustaining double-digit growth. However, data EBITDA margin dipped 240bps QoQ to 24% due to higher employee cost. Company has given strong directional guidance, which puts it in a significantly better position: 1) TCom will continue to invest in people, products and platforms as it sees multiple opportunities, which it doesn't want to miss for under-investment; 2) capex requirement may rise for driving Digital Services to 50% of data revenue; 3) company will not compromise on RoCE at >25%, which implies strong revenue growth. "TCom has seen significant improvement in its orderbook, particularly in large deals (TCV >US$1mn) and it remains confident of continuing to improve on it in FY24/FY25, to facilitate which it has upfronted investments. We believe strong revenue growth will eventually drive operating leverage and margin improvement," the brokerage has said.

It added, "We have cut our EPS estimates by 8% each year for FY24E/FY25E as we factor-in higher costs while remaining conservative on revenue growth. We have also increased capex and accordingly cut our target price to Rs1,510 (unchanged P/E of 20x for FY25E; earlier: Rs1,640). Maintain BUY."

Disclaimer - The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.