Tata Communications (Q1 FY14)

India Infoline News Service | Mumbai |

We revise upwards our FY14/15 estimates and now expect a small profit in FY15 vs loss estimate earlier primarily on higher EBIDTA margin assumption; however, retain Market Performer with revised 9-12 mth target of Rs173 (earlier Rs210)

CMP Rs159, Target Rs173, Upside 8.8%
 
  • Tata Comm Q1 consolidated revenues grew 9.5% yoy driven by 10.2% yoy rise in core business and 3.9% yoy increase in Neotel revenues
  •  Core business update: Voice gross revenues grew 8.5% yoy while EBIDTA margin improved to 11.3% vs 9.5% yoy due to a favourable pricing environment; data services grew faster at 12.4% but margin fell both yoy (-70bps) and qoq (-300bps) due to cost rationalization
  • Margins rose 151bps yoy as company retained its focus on cost control; core business EBIDTA grew ~16% yoy while that for Neotel jumped 70% to Rs1bn; Neotel EBIT turned +ve at Rs417mn vs EBIT loss of Rs204mn a year ago. Q4 FY13 depreciation was lower due to change in policy hence was not a true indicator of quarterly depreciation run rate
  • Q1 FY14 exceptional gain of ~Rs2.2bn represent input credits received against certain statutory obligations of earlier periods   
  • Core business operating at peak net debt level of ~US$1.5bn, slightly higher qoq due to adverse FX translation and temporary working cap mismatch (since corrected) though lower cost of borrowing has reduced interest expenses; FY14 capex seen at ~US$300mn    
  • We revise upwards our FY14/15 estimates and now expect a small profit in FY15 vs loss estimate earlier primarily on higher EBIDTA margin assumption; however, retain Market Performer with revised 9-12 mth target of Rs173 (earlier Rs210)
Results table (consolidated)
(Rs m) Q1 FY14 Q4 FY13 % qoq Q1 FY13 % yoy
Net sales 44,980 44,005 2.2 41,074 9.5
Network costs (24,679) (24,893) (0.9) (22,681) 8.8
Operating & other exp. (7,763) (8,198) (5.3) (7,061) 9.9
Personnel costs (6,022) (6,049) (0.4) (6,004) 0.3
Operating profit 6,516 4,865 33.9 5,328 22.3
OPM (%) 14.5 11.1 343 bps 13.0 151 bps
Depreciation (5,037) (4,273) 17.9 (5,290) (4.8)
Interest (1,663) (1,878) (11.5) (2,063) (19.4)
Other income 264 414 (36.3) 1,133 (76.7)
PBT 79 (872) - (893) -
Tax (1,298) (1,081) 20.1 (528) 145.9
Minority Int/Associates 2 67
(8)
Adjusted PAT (1,217) (1,885) (35.4) (1,429) (14.8)
Extra ordinary items 2,162 1,833 17.9 - -
Reported PAT 945 (52) - (1,429) -
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m) FY12 FY13 FY14E FY15E
Revenues 141,961 172,130 202,446 231,574
yoy growth (%) 19.0 21.3 17.6 14.4
Operating profit 17,915 20,597 26,723 31,263
OPM (%) 12.6 12.0 13.2 13.5
Reported PAT (7,947) (6,234) (4,127) 373
yoy growth (%) 2.3 (21.6) (33.8) -





EPS (Rs) (27.9) (21.9) (14.5) 1.3
P/BV (x) 2.0 3.2 4.5 4.4
EV/EBITDA (x) 10.5 9.7 7.6 6.5
ROCE (%) 0.7 1.5 3.9 5.6
Source: Company, India Infoline Research
BSE 687.50 [14.70] ([2.09]%)
NSE 686.90 [14.15] ([2.02]%)

***Note: This is a NSE Chart

 

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