Tata Communications - Q4FY21 First Cut - ICICI Direct

(CMP - Rs. 1150; MCap - Rs. 32764 crore)

Tata Communication Q4FY21 performance was a mixed bag wherein weakness in revenue was seen but lower costs led to superior margins.

Q4FY21 earnings summary

- Topline came in at Rs. 4073 crore, down 7.4% YoY & 3.5% QoQ (lower than our estimates of 2% QoQ growth). The data revenues (forming ~86% of the revenues) declined by 2.2% YoY (down 0.9% QoQ) vs. expectations of 2.5% QoQ growth. The data revenues was driven by Traditional services revenue which grew by 3.7% YoY (down 0.5% QoQ) with traction from Enterprise and OTT segments. The Growth services, however, witnessed weak performance with revenues down 9.6% YoY (down 3.9% QoQ), largely due to slower deal conversion and moderation of UCC traffic which had surged in Q4 of last year. Voice segment continued to remain weak with revenues down 30.5% YoY (down 17.2% QoQ) at Rs. 558 crore

- Consolidated EBITDA came in at Rs. 1015 crore, up 16.8% YoY & down 3.1% QoQ.. The QoQ EBITDA decline was due to higher R&M expenses which are back ended in nature and certain one-time catch up costs in Growth services. The consequent margin was at 24.9% (up 517 bps YoY and 15bps QoQ). Data EBITDA margin was at 27.9%, up 500 Bps YoY (down 100 bps QoQ due to one-off impacts). Voice segment margins at 6.4%, was dup 70 bps YoY

- The company reported a PAT of Rs. 299 crore vs. expectations of Rs. 273 crore, with beat owing to higher other income, lower interest costs despite higher depreciation. Another key positive was sequential decline in debt by ~Rs. 186 crore, with Net Debt to EBITDA at comfortable levels of 1.8x as compared to 2.8x in FY20

- Tata Communication remains a key beneficiary of new normal of work from home, increased conferencing needs thereof and overall digitisation at enterprise levels. We seek management commentary on the growth trajectory ahead, which has tapered off of late. We will soon come up with an update post the conference call.

Shares of TATA COMMUNICATIONS LTD. was last trading in BSE at Rs.1149.15 as compared to the previous close of Rs. 1155.8. The total number of shares traded during the day was 23932 in over 1593 trades.

The stock hit an intraday high of Rs. 1170 and intraday low of 1135.1. The net turnover during the day was Rs. 27478953.

Source : Equity Bulls

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