ICICI Sec Rekha Jhunjhunwala portfolio stock is bullish in 3 months

Research analysts at broking firm ICICI Securities said in a note that “the telecom sector is back on track after three to four weeks of relief. In this sector, we remain constructive on Tata Communications as it is signaling an upside move from a bullish flag formation and offers a fresh entry opportunity. 10 week EMA (currently 1280), which has provided an incremental buying opportunity in the last four to five months.”

“In the shorter time frame, the stock has seen a bullish retracement of last five weeks’ decline ( 1347-1251) highlighted strength and a strong price structure in just one week. We expect the stock to maintain positive bias and move up 1535 in coming months as it is price parity with previous upward move ( 1096–1347) as estimated from the Recent Basin 1251,” he further added in his note.

“The management maintained FY23 margin guidance in the range of 23-25% as they intend to reinvest incremental margins to drive growth. However, we expect margins to bounce back once the revenue growth trajectory is back in double digits given the boost to operating leverage. Growth funnel (pre-stage of order book) deal win rate with order book remains stable QoQ and healthy. The company seeks to drive growth through enhanced product offerings in next generation connectivity, ezo van, cloud etc. It continues to hit the road with new hiring and expanded regional presence through sales and marketing spends. The company indicated that supply chain issues remain but it is trying to deal with them by placing advance orders. Supply chain issues and delayed deliveries have also led to lower capex in Q1 and Q2. However, Tata Communications is now treating the supply chain issue as business as usual. We believe a full recovery in revenue growth will be possible only when supply chain issues are sorted out,” analysts said.

“The company’s strategic growth plan, focused outlook and structural improvements in data segment margins have prompted multiple re-ratings. While the demand outlook remains strong in the medium/long term, revenue recovery has been slow due to delay in deal closures and supply chain issues. A correction in this will be key to recovery of earnings growth, said research analysts at broking firm ICICI Securities.

As per the shareholding pattern of Tata Communications for Q2FY23, Rekha Jhunjhunwala holds 45,75,687 shares or 1.61 per cent stake in the company. Shares of Tata Communications Limited closed today 1,297.80, down 1.14% from its previous close 1,312.75. On YTD basis, the stock has declined 10.21% so far in 2022.

The views and recommendations given above are of individual analysts or broking companies and not of Mint.