Stock to buy: JM Financial initiates coverage on this Tata stock, sees 35% upside scope

Brokerage firm JM Financial, on Wednesday, said that it has initiated coverage on Tata Communications share price and has assigned ‘buy’ rating to the Tata stock. The brokerage firm has set the target price of ₹2,030, sees an upside potential up to 34.8 per cent.

“We initiate coverage with a BUY (TP of INR 2,030) based on 11x FY27 EV/EBITDA multiple for the data segment, as we expect data segment EBITDA CAGR at ~21% over FY24-28E,” the brokerage firm said in a note.

Tata Communications share price surged as much as 3.20 per cent on Wednesday. At 9:30 am, the stock was trading at ₹1,570 on March 19. The share has gained over 4 per cent in over a month, however, has fallen nearly 21 per cent in six months.

Tata Communications key growth drivers

The brokerage firm believes that the Tata Communications stock is all set to be long-term growth driver as the company has positioned itself as a key enabler of enterprise digital transformation by focusing on cloud computing, security, mobility, AI-driven collaboration, and IoT solutions.

“We expect digital portfolio segment revenue to grow at a CAGR of 22% over FY24-FY28, accounting for ~53% of data revenue by FY28 (from 41% in FY24). Though digital portfolio segment margins have been hit due to increased investments in both organic and inorganic growth opportunities, the management expects margin to improve sharply driven by operating leverage from higher volumes, expansion into multiple geographies, cost optimisation, and better service mix,” the brokerage firm said.

Tata Communications was incorporated in 1986 as Videsh Sanchar Nigam (VSNL), a wholly owned government of India (GoI) company, to take over the control and management of all international telecommunication services from Overseas Communication Services department in India.

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