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Tulip Telecom
Reco: HOLD
CMP: Rs 99
Target Price: Rs 111
High leverage remains a concern, Maintain HOLD
· Data centre currently has 20,000sq ft operational capacity with order book of Rs6bn spread over 5 years. Company expects to rent additional ~55,000sq ft capacity by FY12 end
· Data centre has peak potential capacity of 4lac sq ft. Management targets Rs10bn revenue in 5 years and 40% peak EBITDA (once facility is fully operational)
· In connectivity business growth is expected to taper down to 15% in FY13E compared to 20% yoy earlier run-rate, due to overall slowdown in economy
· Debt would increase by Rs4.5bn in FY13E, led by FCCB redemption and ongoing capex for Data Centre which would result in higher interest outgo. We cut EPS est. by 18.8% for FY13E. Maintain HOLD with revised TP of Rs111
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