Result Analysis Tata Communications Ltd.

Result Analysis: Tata Communications Ltd. (CMP: Rs.1383)

Result Update: Q3FY23

Tata Communications is an Indian telecommunications company engaged in the next level of intelligence powered by Cloud, Mobility, Internet of Things IoT, Collaboration, Security, Media services and Network services. The company’s global network includes one of the most advanced and largest submarine cable networks. Tata Communication is in the top 5 IP providers on 5 continents and offer public and private network connectivity to more than 240 countries and territories.

 

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Outlook:

Tata Communications has reported overall muted performance in the December’22 quarter with stagnated growth of 2.2% in Revenue and degrowth of 26.6% in the Net Profit compared to September’22 quarter. Rising interest cost (by ~25% QoQ) has majorly impacted the net profits of the company and on the revenue front, rising competition and prevailing macro headwinds have added additional pressures. Company’s revenue% from other geographies has declined in the Data services segment for the quarter. The company has recorded 11% YoY growth in the data services segment and 6% YoY growth in the core connectivity portfolio in Q3FY23. The management remains positive with the expanding order book and customer engagements. For the nine months of FY23 Tata Communication has reported the earnings of Rs.51.58 and we expect the company to close the FY23 at the eEPS of Rs.68.7. Based on the estimated earnings the expected PE of the company is 20x at the CMP of Rs.1383.

Results:

Particulars (In Rs. Cr.)	Q3FY23	Q2FY23	Q3FY22	QoQ%	YoY%	9MFY23	9MFY22	FY22
Revenue from Operations	4,528	4,431	4,185	2.20%	8.21%	13,270	12,462	16,725
Other Income	31	37	19	-16.03%	63.56%	301	69	332
Total Income	4,559	4,467	4,204	2.05%	8.45%	13,571	12,530	17,057
Network and transmission expense	1,616	1,563	1,530	3.40%	5.61%	4,737	4,659	6,199
Employee expense	921	870	734	5.80%	25.49%	2,598	2,272	3,040
Other Expense	914	868	838	5.34%	9.04%	2,651	2,349	3,258
EBITDA	1,077	1,130	1,082	-4.63%	-0.47%	3,284	3,181	4,227
EBITDA Margin (%)	23.8%	25.5%	25.9%	-1.70%	-2.07%	24.7%	25.5%	25.3%
Finance Cost	123	98	83	25.46%	47.00%	300	270	360
Depreciation & Amortisation expense	555	552	542	0.58%	2.28%	1643	1616	2205
Exceptional Items	–	76	8	–	–	76	27	6
Profit Before Tax (PBT)	431	593	484	-27.40%	-11.00%	1718	1391	2000
Tax	44	66	96	-33.82%	-54.51%	269	279	522
Profit After Tax (PAT)	387	527	388	-26.60%	-0.26%	1449	1112	1478
PAT Margin (%)	8.5%	11.9%	9.3%	-3.35%	-0.73%	10.9%	8.9%	8.8%
EPS (in Rs.)	13.82	18.68	13.87	-26.02%	-0.36%	51.58	39.18	51.99

Segment Revenue (In Rs. Cr.)	Q3FY23	Revenue%	Q2FY23	QoQ%	Q3FY22	YoY%
Voice Solutions	506	11.2%	524	-3.6%	554	-8.7%
Data Services	3,609	79.7%	3,507	2.9%	3,247	11.1%
Payment Solutions	50	1.1%	46	8.4%	44	13.9%
Transformation Services	358	7.9%	347	3.3%	337	6.3%
Real Estate	50	1.1%	49	0.9%	44	12.4%
Less: Inter Segment Revenue	43	1.0%	43	1.9%	41	6.3%
Total	4,528		4,431		4,185

Source: Company website, EWL Research

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