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Tulip Telecom Limited Overweight
TULP.BO, TTSL IN
FY12 off to a strong start; Reiterate OW
Revenue growth accelerated, estimates increased: Tulip Telecom
delivered ~25% Y/Y revenue growth in Q1, beating our above-consensus
estimates. We believe a higher contribution from fibre, international
business (via the Hutchinson agreement) and quicker execution of orders
helped in Q1. We expect TTSL to maintain 20%+ growth levels for the rest
of the year and have increased or FY12 revenue estimates by 1%. With
incremental revenue streams expected to kick in, we forecast 23% revenue
growth (ahead of management’s 20% guidance) and 1pp margin expansion
to 29.2%.
Data Centre order win: The company announced its first DC client win.
This is for 30,000 sq ft over 5 years with a revenue potential of INR 5 bn.
We believe this indicates a rental of INR2.8K/month which is much higher
than the company's prior indication of INR 1.6K/month. We view the
announcement of a client here as a key positive for Tulip and we await the
announcement of an investor.
Watching debt and leverage: TTSL saw debt increase by Rs1.5B Q/Q
while leverage (debt/EBITDA) declined very slightly to 2.6x from 2.7x. The
debt increase was driven by the core business. We would be encouraged to
see an indication of effort/steps taken to bring down leverage and debt,
which will be a key focus in FY12, according to management.
Forecast changes: Our estimates are revised very slightly post Q1 results.
We increase our FY12/FY13 revenue estimates slightly by 0.9%/0.6% but
leave our margin estimates unchanged at 29.2%/30.5%. Our EPS estimates
are now INR 21.8/29.4 (basic EPS of INR 24.5.31.5)
Mar-12 PT of Rs230: Our price target remains unchanged. Announcements
of more clients or an investor for the data centre business should be key
positive catalysts. The core business continues to show improvements.
TTSL trades at 6.4x 1-yr forward P/E a 29% discount to its three-year
average, and at 4.0 EV/EBITDA, a 33% discount. Key risks: stiffer-thanexpected
price competition in TTSL’s core business, and a slower-thanexpected
ramp-up of its data center business.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tulip Telecom Limited Overweight
TULP.BO, TTSL IN
FY12 off to a strong start; Reiterate OW
Revenue growth accelerated, estimates increased: Tulip Telecom
delivered ~25% Y/Y revenue growth in Q1, beating our above-consensus
estimates. We believe a higher contribution from fibre, international
business (via the Hutchinson agreement) and quicker execution of orders
helped in Q1. We expect TTSL to maintain 20%+ growth levels for the rest
of the year and have increased or FY12 revenue estimates by 1%. With
incremental revenue streams expected to kick in, we forecast 23% revenue
growth (ahead of management’s 20% guidance) and 1pp margin expansion
to 29.2%.
Data Centre order win: The company announced its first DC client win.
This is for 30,000 sq ft over 5 years with a revenue potential of INR 5 bn.
We believe this indicates a rental of INR2.8K/month which is much higher
than the company's prior indication of INR 1.6K/month. We view the
announcement of a client here as a key positive for Tulip and we await the
announcement of an investor.
Watching debt and leverage: TTSL saw debt increase by Rs1.5B Q/Q
while leverage (debt/EBITDA) declined very slightly to 2.6x from 2.7x. The
debt increase was driven by the core business. We would be encouraged to
see an indication of effort/steps taken to bring down leverage and debt,
which will be a key focus in FY12, according to management.
Forecast changes: Our estimates are revised very slightly post Q1 results.
We increase our FY12/FY13 revenue estimates slightly by 0.9%/0.6% but
leave our margin estimates unchanged at 29.2%/30.5%. Our EPS estimates
are now INR 21.8/29.4 (basic EPS of INR 24.5.31.5)
Mar-12 PT of Rs230: Our price target remains unchanged. Announcements
of more clients or an investor for the data centre business should be key
positive catalysts. The core business continues to show improvements.
TTSL trades at 6.4x 1-yr forward P/E a 29% discount to its three-year
average, and at 4.0 EV/EBITDA, a 33% discount. Key risks: stiffer-thanexpected
price competition in TTSL’s core business, and a slower-thanexpected
ramp-up of its data center business.
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