Tata Communications share price: Domestic brokerage JM Financial has initiated coverage on Tata Communications Ltd. It is positive on the Tata Group counter highlighting the growth potential in Tata Communications digital portfolio and resilience in macroeconomic conditions.
JM Financial has issued a 'buy' rating for Tata Communications (TCOM) as the financial services firm bases its positive outlook on its strategic investments, which are expected to significantly boost its digital portfolio. This expansion is seen as pivotal in enhancing the company’s overall business resilience and ability to capitalise on improving macroeconomic conditions.
The valuation approach employed by JM Financial is the sum-of-the-parts method, which reflects the robust potential of TCOM's core connectivity and burgeoning digital portfolio businesses. As of now, TCOM's digital operations are almost equal in size to its main business line, a testament to its successful strategy of widening its total addressable market, said JM Financial.
JM Financial believes that Tata Communications' existing capabilities, particularly within its digital segment, provide it with a competitive edge. This segment is part of a broader transition into a "CommTech" company, blending traditional connectivity with digital innovation. This transformation is anticipated to drive sustained growth and profitability over the coming years.
"Despite potential challenges from competitors like Bharti Airtel and Jio, and regulatory risks associated with the allocation of 5G spectrum, JM Financial's analysis underscores TCOM's solid market position. The report cautions about possible regulatory hurdles, yet remains optimistic about the company's strategic direction and resilience," it added.
JM Financial forecasts continued improvements in TCOM's Ebitda margins as a result of its digital infrastructure investments. By maintaining a clear focus on enhancing shareholder value through strategic expansions, it is well-positioned to deliver promising returns as market conditions evolve, said the brokerage firm with a target price of Rs 2,030, suggesting a 35 per cent uspide.
Following the positive view from the brokerage firm, shares of Tata Communications surged nearly 5 per cent to Rs 1,578.45 on Wednesday, with a total market capitalization over Rs 45,000 crore. The stock had settled at Rs 1505.40 in the previous trading session. The stock is still 28 per cent below its 52-week high at Rs 2,175, hit in October 2024. However, it has rebounded over 22 per cent from its all time low at Rs 1,293.
Recently, ICICI Securities also upgraded Tata Communications to 'buy' from 'hold' after the stock price plunged notably beset by near-term revenue weakness – making the company’s revenue guidance seem rather ambitious. This presents strong upside potential and compelling risk-reward, it said.
With the Red-sea issue behind and double-digit FY25–TD OB growth, TCom’s data revenue growth will likely swell. We believe TCom’s strong digital product portfolio aside, Street is yet to bake in Rs 3,300 crore of FY27E FCF generation in core connectivity. Also, TCom has been agile in embedding AI in internal process/services, ICICI Securities added with a target price of Rs 1,840.
Tata Communications reported 424 per cent year-on-year (YoY) growth in its consolidated net profit at Rs 236 crore in the third quarter ended on December 31, 2024. Its revenue from operations in the reporting period jumped 4 per cent YoY to Rs 5,798 crore in Q3FY25. Ebitda rose 4 per cent YoY to Rs 1,181 crore while margins expanded 23 bps to 20.4 per cent for the quarter.
Nuvama Institutional Equities continue to see TCOM as an exciting play, offering the best of telecom (stability) and IT Services (growth) sectors. It has a 'buy' rating on the stock after a target price of Rs 2,000. Motilal Oswal has a 'neutral' rating on the stock with a target price of Rs 1,850.