 "Tata Communications posts first quarterly profits since FY09")
The Tata Communications scrip jumped 8.5% to Rs 248 after the company posted its first profitable quarter since FY09. The improved performance was led by a sharp jump in EBITDA margins which grew 660 bps year on year to 16.9% as compared to the year ago quarter. Even on a sequential basis margins were up a healthy 240 basis points. It is the spurt in margins which helped the company record a net profit of Rs 80 crore in the September quarter.
Net profit after over 12 quarters of losses signals a turnaround in core business performance and its measures to improve its financials are paying off leading to analyst upgrades. Rumit Dugar and Udit Garg of Religare Institutional Research have raised their FY14 and FY15 Ebidta by 6%.
Net profit after over 12 quarters of losses signals a turnaround in core business performance and its measures to improve its financials are paying off leading to analyst upgrades. Rumit Dugar and Udit Garg of Religare Institutional Research have raised their FY14 and FY15 Ebidta by 6%.
Most analysts have a buy on the company with targets ranging from Rs 300-Rs 400. The company is valued at 23 times its FY15 earnings and 5 times its EV/Ebidta ratio for FY15. While the share price has seen a jump of 49% from the start of August, at the target prices mentioned there is still an upside ranging from 21-61%.
Revenues in the quarter at Rs 4,950 crore up 10-16% on a sequential and y-o-y basis were ahead of estimates. The voice business which contributes about 50% of revenues grew 15% on a y-o-y basis aided by depreciating rupee. Margins for this segment grew 480 bps to 10.9% y-o-y though on a sequential basis they were down 40 bps. The June quarter witnessed a temporary spike in margins for this business. The management has revised its guidance for the voice business margins (on a sustainable basis) upwards by 100 bps to 9-9.5%.
It is the global data business which constitutes about 40% of total revenues which saw margins grow between 540-660 bps to 22.1% that helped improve overall margins. The company has indicated that the margins for the segment would be about 20% for the year. While global data revenues grew 11-19% on over the previous and year ago quarters, Ebidta growth was strong 47-70% benefiting from higher margins in the segment.