This Tata group stock has zoomed over 100% since April; do you own it?

Shares of Tejas Networks hit a record high of Rs 1,413.70, soaring 10 per cent in intraday trade today

Shares of Tejas Networks (Tejas) hit a record high of Rs 1,413.70 as they rallied 10 per cent on the BSE in Tuesday's intraday trade on a healthy outlook. In the past four trading days, the stock of the Tata group company has bounced back 40 per cent from its recent low of Rs 1,007.60 touched on Wednesday, June 6.

Since April, thus far in the financial year 2024-25 (FY25), the market price of Tejas has more-than-doubled, zooming 116 per cent from a level of Rs 656 hit on March 28. In comparison, the BSE Sensex was up 4 per cent during the same period.

Tejas is a wireline and wireless telecom and data networking products company that designs, develops, and manufactures high-performance and future-ready products for building high-speed communication networks. The aim is to carry voice, data, and video traffic from fixed line, mobile, and broadband networks.

Tejas products are differentiated by a programmable, software-defined hardware architecture that provides flexibility, multi-generation support, and a seamless software-enabled network transformation to its customers.

Tejas' customers include telecommunications service providers, internet service providers, web-scale internet companies, utility companies, defense companies and government entities. The company also exports its products to overseas territories.

In the March quarter (Q4FY24), Tejas had reported robust earnings with profit after tax of Rs 146.80 crore, as against a net loss of Rs 11.5 crore in the year-ago quarter. The company's net revenue rose over four-fold to Rs 1,326.90 crore in Q4FY24, compared to Rs 299.30 crore in Q4FY23. The company ended the year with a strong order book of Rs 8,221 crore for execution in FY25 and beyond.

The company expects India business to continue to be a large majority of its revenues over the next two-three years. The management sees a strong capex cycle for telecom equipment, fuelled by the ongoing 5G rollout, increase in fiber-broadband penetration, and increased focus by the Government on connectivity in rural areas.

According to the management, the Government of India's focus on building an 'Atmanirbhar Bharat' that is self-reliant in core telecom technology areas is benefiting domestic telecom equipment companies like Tejas with strong R&D capabilities and in-house intellectual property rights (IPR).

In response to the Government of India’s ‘Atmanirbhar Bharat’ call, Tata Consultancy Services Limited (TCS), Centre for Development of Telematics (C-DOT), and Tejas collaborated to design and develop an indigenous telecom stack.

Tejas is the supplier of 4G/5G baseband and radio units for this network and has received its single largest order of Rs 7,492 crore from TCS. The company said it shipped equipment for over 10,000 sites by the end of FY24 and is well-poised to complete the project by end of this year.

The telecom industry is witnessing an increasing adoption of high speed mobile broadband technologies based on 3GPP standards. Mobile networks are rapidly evolving from 2G/3G to 4G/5G technologies driving a strong demand for 4G and 5G RAN (Radio Access Network) equipment, comprising both baseband and radio units.

"The proliferation of smart phones, tablets, and IoT devices, rollout of new 5G networks for mobile and fixed broadband, and increased penetration of high-speed, fiber-based home and office broadband is driving an exponential surge in data traffic worldwide. This, in turn, is driving a greater demand for high-capacity transmission and routing equipment," Tejas said in its FY24 annual report.

The company is looking at several high-scale opportunities in India as well as internationally. It anticipates an increase in investment in the 4G-saturated networks of Africa and Asia by private telcos for their backhaul expansion of 4G and 5G networks. The tender for BharatNet Phase III is in process (initial estimate of over $500 million capex) and is getting finalised.

Analysts at Emkay Global Financial Services see Tejas scaling up, based on the GoI’s spending plan for BSNL, BharatNet-3, Railways’ Kavach upgradation, etc which is likely to furnish orders worth ~Rs 30,000 crore; international revenue gaining pace, with the US Rip & Replace program granting new opportunities; the PLI scheme benefits for 5 years. 

"Tejas is set to benefit from cost-competitive R&D vs. peers, asset-light model with EMS partners, and the acquisition of Saankhya Labs for wireless solutions," the brokerage firm said. The stock, however, is trading above the brokerage's target price of Rs 1,100 per share.