Tata Communications (Q3 FY14)

India Infoline News Service | Mumbai |

Adjusted Neotel EBIDTA jumped 157% to ~Rs1.3bn from ~500mn a year ago translating in to margin of 24.6% on revenue growth of 8% yoy (-2.6% qoq).

CMP Rs303, Target Rs340, Upside 12.2%
  • Adjusted Q3 revenues flat qoq and up 11.7% yoy led by 17.8% yoy rise in data business (+2.9% qoq)

  • Voice business grew 9.7% yoy and as hinted in the previous quarter, voice margin normalized to 8.3% from elevated Q2 level of ~11% due to moderation in India termination pricing; company mentioned that the termination adjustment is largely over though some residual impact may be felt in current quarter. Carrier segment witnessed slowdown with total vols (ILD+NLD) down ~12% yoy while data margin declined ~180bps to 20.3% qoq  

  • Adjusted Neotel EBIDTA jumped 157% to ~Rs1.3bn from ~500mn a year ago translating in to margin of 24.6% on revenue growth of 8% yoy (-2.6% qoq). Adjusted for export benefit Rs424mn and Neotel write back Rs337mn of previous years, EBIDTA margin still improved 139bps yoy on the back of sharper focus on cost control in network and staff expenses

  • Company expects 7.5%-8.5% voice margin and onset of operating leverage in the data business; it guided for core business capex of US$300mn. Operating metrics continue their steady improvement while potential stake sale in Neotel would reduce leverage at consolidated entity; retain BUY reco with unchanged 9-12mth target of Rs340. 

Results table (consolidated)
(Rs m) Q3 FY14 Q2 FY14 % qoq % yoy 9m FY14 % yoy
Net sales 49,537 49,526 0.0 11.7 144,466 12.8
Network costs (26,921) (27,061) (0.5) 6.4 (78,960) 8.7
Other exp (8,709) (8,238) 5.7 18.6 (24,412) 12.4
Personnel costs (6,168) (5,863) 5.2 8.5 (18,053) (0.1)
Operating profit 8,162 8,364 (7.5) 28.7 23,041 46.5
OPM (%) 15.6 16.9 (127) bps 207 bps 15.9 367 bps
Depreciation (5,202) (5,431) (4.2) (3.7) (15,670) (2.0)
Interest (1,976) (2,010) (1.7) 4.6 (5,649) (6.8)
Other income 670 393 70.2 66.6 903 (51.2)
PBT 1,230 1,316 (6.5) - 2,625 -
Tax (870) (511) 70.1 114.9 (2,679) 138.9
Minority/Associates 4 (1) - (93.2) 5 -
Adjusted PAT 365 804 (54.6) - (48) -
Exceptionals - - - - 2,162 -
Reported PAT 365 804 - 2,114 -
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m) FY13 FY14E FY15E FY16E
Revenues 172,130 196,632 221,664 248,482
yoy growth (%) 21.3 14.2 12.7 12.1
Operating profit 20,597 30,281 34,136 38,515
OPM (%) 12.0 15.4 15.4 15.5
Reported PAT (6,234) 2,615 2,915 4,280
yoy growth (%) (21.6) - 11.5 46.8
EPS (Rs) (21.9) 9.2 10.2 15.0
P/E (x) - - - -
P/BV (x) 5.5 4.6 4.0 3.3
EV/EBITDA (x) 11.3 7.6 6.6 5.9
ROCE (%) 1.5 5.9 7.3 8.5
Source: Company, India Infoline Research

***Note: This is a NSE Chart

 

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