Motilal Oswal recommended Neutral rating on Tata Communications with a target price of Rs 900 in its research report dated October 19, 2020.
Tata Communications’ (TCOM) 2QFY21 revenues were flat (in-line) despite the expectation of increasing data usage due to work from home (WFH). EBITDA jumped 11% QoQ (12% beat), led by sharp data margin improvement, which can be partly attributed to cost cutting initiatives and some portion to one-time COVID-19 cost benefit. We have increased our FY21/FY22E EBITDA estimates by 9%/10% due to better-than-expected EBITDA, driven by the cost initiatives. We have built in 23% EBITDA CAGR over FY20-22E with 106% growth for 2HFY21.
However, the stock’s sharp rally from INR230 in Apr’20 to INR920 currently (3x growth), leaves limited upside. Maintain Neutral.