ICICI Sec is bullish on this Rekha Jhunjhunwala portfolio stock in 3 months of target frame

The research analysts of the broking firm ICICI Securities have said in a note that “The telecom sector has been regaining traction after three to four weeks of breather. Within this space, we remain constructive on Tata Communication as it is seen resolving out of a bullish flag formation signalling continuance of the up move and offers a fresh entry opportunity. Buying demand is seen emerging after a higher base above the 10 week’s EMA (currently at ₹1280), which has provided an incremental buying opportunity in the last four to five months.”

“In the smaller time frame, the stock has witnessed a faster retracement of the last five week’s decline ( ₹1347-1251) in just one week highlighting strength and a robust price structure. We expect the stock to maintain positive bias and head towards ₹1535 in the coming months as it is the price parity with the previous up move ( ₹1096-1347) as projected from the recent trough of ₹1251,” they further added in their note.

“The management maintained FY23 margins guidance range of 23-25% as they intend to reinvest incremental margins to drive growth. We, however, expect margins to bounce back once the revenue growth trajectory returns to double digits boosting operating leverage. Growth funnel (pre-stage of order book) deal win rate along with order book have remained stable QoQ and healthy. The company intends to drive growth by enhanced product offerings in next gen connectivity, IZO WAN, cloud, etc. It also continues to put feet on the street with new hiring and expanded regional presence through sales and marketing spends. The company indicated that supply chain issues continue to remain but it is trying to tackle it through advance ordering. The supply chain issue and delayed deliveries have also led to lower capex in Q1 and Q2. However, Tata Communications is now treating supply chain issue as business as usual. We believe that full blown recovery in revenues growth will only be possible when the supply chain issues get sorted,” said the analysts.

“The company’s strategic growth plan, focused approach and structural improvement in data segment margins has driven multiple re-rating. While the demand outlook is robust in the medium/long term, deal closures delays and supply chain issues have led to a slower recovery in revenues. An improvement in this will be key for an earnings growth recovery,” said the research analysts of the broking firm ICICI Securities.

According to Tata Communications’ shareholding pattern for Q2FY23, Rekha Jhunjhunwala holds 45,75,687 company shares or a 1.61 per cent stake in the company. The shares of Tata Communications Limited closed today at ₹1,297.80, down by 1.14% from the previous close of ₹1,312.75. On a YTD basis, the stock has fallen 10.21% so far in 2022.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.