Tata Communications (Q3 FY13)

India Infoline News Service | Mumbai |

Core business returned to PBT +ve before one-off staff optimization expenses while Neotel pre tax loss at Rs984mn also declined 43% yoy; core business debt is at peak levels of US$1.6bn

CMP Rs228, Target Rs210, Downside 7.9% 
  • Tata Comm Q3 revenues up 23% yoy & 3.8% qoq driven by voice (gross revs +28% yoy), data (gross revs +21% yoy); Neotel sales up 9.6% yoy (+10.6% yoy in CC)
  • In the voice segment, ILD volumes at +18% yoy outpaced industry growth while realizations (net rev/min) saw slight improvement sequentially; within data, Enterprise business posted 20% yoy growth
  • Benefit of optimization in staff costs (-136bps yoy) was nullified by higher network and operating costs which led to 37bps yoy dip in Q3 margin though sequential margin improved 327bps; core business (ex-Neotel) EBIDTA growth at +12.7% yoy (+42% qoq) while Neotel EBIDTA too jumped ~4x leading to a ~20% yoy growth in consol EBIDTA
  • Core business returned to PBT +ve before one-off staff optimization expenses while Neotel pre tax loss at Rs984mn also declined 43% yoy; core business debt is at peak levels of US$1.6bn
  • Leverage continues to be a key concern and lack of any near term catalysts to reduce the same would weigh on the stock performance; we revise our FY13/14 estimates and introduce FY15 forecasts wherein we expect losses to persist; correction in stock price since our Q2 update leads to upgrade in reco to Market Performer with unchanged 9-mth target of Rs210  
Results table (consolidated)
(Rs m) Q3 FY13 % yoy Q2 FY13 % qoq 9m FY13 % yoy
Net sales 44,341 23.0 42,710 3.8 128,125 25.2
Network costs (24,946) 25.4 (24,043) 3.8 (71,671) 25.0
Operating & other exp. (7,702) 28.1 (7,894) (2.4) (22,656) 32.9
Personnel costs (5,682) 11.2 (6,380) (10.9) (18,066) 21.2
Operating profit 6,011 19.8 4,394 36.8 15,732 20.4
OPM (%) 13.6 (37) bps 10.3 327 bps 12.3 (48) bps
Depreciation (5,400) 14.2 (5,307) 1.8 (15,998) 20.5
Interest (1,888) (1.7) (2,112) (10.6) (6,063) (6.5)
Other income 402 (23.0) 318 26.5 1,852 104.1
PBT (876) (21.0) (2,708) (67.6) (4,477) (22.6)
Tax (405) 160.9 (189) 114.5 (1,121) 73.5
Minority Int/Associates 62 - 154 - 209 (81.0)
Adjusted PAT (1,219) (20.4) (2,742) (55.6) (5,390) 1.0
Extra ordinary items (791) - - - (791) -
Reported PAT (2,010) 31.3 (2,742) (26.7) (6,181) 15.8
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 141,961 170,897 193,821 215,018
yoy growth (%) 19.0 20.4 13.4 10.9
Operating profit 17,915 21,362 24,615 28,167
OPM (%) 12.6 12.5 12.7 13.1
Reported PAT (7,947) (7,447) (4,901) (2,322)
yoy growth (%) 2.3 (6.3) (34.2) (52.6)





P/BV (x) 2.8 4.2 6.2 8.0
EV/EBITDA (x) 11.5 10.3 9.2 8.0
ROCE (%) 0.7 1.8 2.7 4.0
Source: Company, India Infoline Research

BSE 694.55 [5.60] ([0.80]%)
NSE 696.40 [1.90] ([0.27]%)

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