Tata Communications shares gain 4% post Q4 earnings; what should investors do?

Shares of Tata Communications Ltd rose over 4% a day after the Tata Group firm reported earnings for the quarter ended March 2023. Tata Communications stock gained 4.55% to Rs 1248.05 against the previous close of Rs 1193.70 on BSE.  The large cap stock has lost 6.42% in one year and fallen 3.45% since the beginning of this year. Total 0.87 lakh shares of the firm changed hands amounting to a turnover of Rs 10.55 crore on BSE. Market cap of the Tata Group firm climbed to Rs 35,143 crore. The stock hit a 52-week high of Rs 1429.95 on January 12, 2023 and a 52 week low of Rs 856 on June 15, 2021.

In terms of technicals, the relative strength index (RSI) of the Tata Communications stock stands at 38.8, signaling it's trading neither in the overbought zone nor in the oversold zone. Tata Communications shares have a beta of 1, indicating average volatility in a year. Tata Communications shares are trading higher than the 20 day, 50 day and 200 day moving averages but lower than 5 day and 100 day moving averages.

Tata Communications reported a 11% fall in Q4 net profit to Rs 326.03 crore against Rs 365.06  crore in the corresponding quarter of the previous fiscal.

Consolidated income from operations rose marginally to Rs 4,586.66 crore in Q4 from Rs 4,263.03 crore in the March 2022 quarter.

The company posted a 21 per cent increase in consolidated profit at Rs 1,795.96 crore for the fiscal ended March 31, 2023 compared to Rs 1,481.76 crore at the end of 2021-22. Consolidated income from operations rose 6.6 per cent to Rs 17,838.26 crore at end of 2022-23 from Rs 16,724.73 crore it posted at the end of 2021-22.

Financial services firm Motilal Oswal is neutral on the Tata Communications stock.

“As a result of interest rate hikes globally, interest costs increased by 8% QoQ to Rs 130 crore, pushing up the average cost of borrowing to 5.88% in 4QFY23 from 5.08% in 3QFY23. Committed capex rose 36% QoQ to Rs 530 crore in 4QFY23 against Rs 390 crore in 3QFY23. It has remained near Rs 400 crore every quarter,” said the brokerage.

Abhijeet from Tips2trades said, "Tata Communications looks bearish on the daily charts with strong resistance at Rs 1297. A fall till support of Rs 1215 looks likely."

Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher said, “The stock has taken support near the significant 200DMA level of Rs 1160 and indicated a decent pullback to move past the important 50EMA level of Rs 1230 to improve the bias and sentiment anticipating for further upward move till Rs 1370-1400 zone. The RSI has shown a steady and decent pick up to strengthen the trend and has visibly much upside potential from here on. With the chart looking attractive, we suggest to buy the stock for an upside target of Rs 1400 keeping the stop loss of Rs 1220.”

Tata Communications is engaged in the business of providing international telecommunications services. The company’s segments include Voice Solutions (VS), Data and Managed Services (DMS). The VS segment includes international and national long distance voice services. The DMS segment includes corporate data transmission services, virtual private network signaling and roaming services, television, and other network and managed services.

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