Tata Stock Plunging 5% Today: What Are Brokerages Saying?

Shares of Tata Communications continued its losing streak to eight straight sessions on Friday, going down over 5%.

What Happened: The Tata Group company’s results for the March quarter seem to have disappointed investors and analysts. Tata Communications reported a consolidated net profit of ₹321.2 crore for the quarter, approximately 1.5% lower than the ₹326 crore recorded in the same quarter last year. However, the company’s revenue from operations witnessed a robust growth of 24.6%, reaching ₹5,691.7 crore, compared to ₹4,568.7 crore in the corresponding quarter a year ago.

Analysts at Emkay Global and Kotak Securities are also cautious about the stock. Analysts at Kotak Securities maintained their “sell” rating on the stock with a price target of ₹1,525.

The brokerage firm said that the company highlighted that the company ended FY24 on a weak note as growth moderated and margins contracted.

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The company’s margin contracted due to weaker profitability from Kaleyra and an adverse product mix. The margin contraction led to a decline in reported EBITDA by 7% quarter-on-quarter and 2% year-on-year. This figure was 8% below Kotak Securities’ initial estimate.

The reported EBITDA margin also saw a decline of approximately 160 basis points quarter-on-quarter, falling to 18.6%. This was also below Kotak Securities’ estimate of 19.9%.

Emkay also said that while the company’s revenue was broadly in line, the margins missed estimates. The analysts pointed out that the company’s order book has been flattish for the past few quarters. However the brokerage projects revenue growth for Tata Communications driven by investments in the platform and synergies from acquisitions. They anticipate margin improvement starting FY25, due to decreased M&A expenditure, operational leverage from investments, and a concentrated effort on boosting subsidiary profitability.

Price Action: Tata Communication’s share price was down 5.34% to trade at ₹1,755 in early trade on Friday.

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