Tejas Networks hits new high, surges 9% ahead of June quarter results

Shares of Tejas Networks hit a new high of Rs 888.80 as they rallied 9 per cent on the BSE in Wednesday's intra-day trade amid heavy volumes ahead of the company's June quarter earnings (Q1FY24). In the past seven trading days, the stock has surged 26 per cent.

The board of directors of the company is schedule to meet on Friday, July 21, 2023 to consider and approve the unaudited financial results of the company for the quarter ended June 30, 2023.

Tejas Networks is a part of the Tata Group, with Panatone Finvest Ltd. (a subsidiary of Tata Sons Pvt. Ltd.) being the majority shareholder. The company designs and manufactures high-performance wireline and wireless networking products for telecommunications service providers, internet service providers, utilities, defence and government entities in over 75 countries.
 

Thus far in the calendar year 2023, the stock price of Tejas Networks has zoomed 53 per cent, as compared to 9.4 per cent rise in the S&P BSE Sensex. At 02:36 PM, it was quoting 8 per cent higher at Rs 877 with two-fold jump in the average trading volumes. A combined around 3.8 million shares of the company have, thus far, changed hands on the NSE and BSE in trades today.

The government has formulated various supportive policy measures for encouraging Indian electronics and telecom industry and proposed several incentive schemes which are applicable to the company. The company’s products are eligible for Preference to Make in India (PMI) policy which is applicable for government procurement of telecom equipment. The company is also eligible to receive capital subsidy from the Modified Special Incentive Package (MSIPS) scheme.

In FY23, the government had approved the company under the modified design-linked Production Linked Incentive (PLI) scheme with an investment commitment of Rs 750 crore during the scheme period.

The global telecom service provider equipment market can be broadly classified into wireless and wireline segments. The wireless segment predominantly consists of Mobile RAN (Radio Access Network) and Mobile Core products whereas the wireline segment mainly includes Broadband Access, Optical Transmission, Switches and Routers.

With current portfolio of products, the management said the company is able to address a significant portion of this market. At a global level, the total addressable market (TAM) for Tejas' wireline products is estimated to grow from $15.2 Billion in 2022 to $32.7 Billion by 2027. Similarly, the global TAM for Tejas’ wireless products is estimated to grow from $2.4 Billion in 2022 to $30.5 Billion by 2027. All of the major geographic markets in the world are significant addressable markets for these product segments, the company said in its FY23 annual report.

"The Atmanirbhar Bharat Abhiyan of the Government of India (GoI), which is aimed at limiting import dependence and increasing the demand for indigenous products, also provides better growth opportunities for the company. Further, Tejas Networks' application for the designled PLI scheme for manufacturing telecom and networking products has been approved by the Department of Telecom," according to Icra.

The rating agency has reaffirmed 'stable' outlook on opinion that Tejas Networks will continue to benefit from its extensive track record in the industry, financial flexibility as part of the Tata Group along with its strong capital structure and liquidity profile. The company’s ability to generate improved revenue and profitability through sustained growth in business from domestic and international segments while improving its overall collection cycle period will remain the key rating sensitivities, Icra had said in its rationale.