Tata Communications shares up just 5% since 2023 analyst meet; will they move up now?

After a significant time correction -- 5 per cent return since 2023 analyst meet, shares of Tata Communications are currently trading at reasonable 11.3 times one-year forward EV/Ebitda multiples, said analysts as they remain neutral to positive after attending the Tata group firm's 2025 analyst meet.

At the event, Tata Communications said it aspires to realise its earlier ambition of revenue growth, margin leverage and RoCE by FY28 instead of FY27. But analysts felt meeting the targets would still be a tall task, as they await acceleration in data revenue, along with margin expansion going ahead. 

MOFSL said its earnings estimates remain unchanged for Tata Communications post the meet. It believes Tata Communications would fall short of its ambition of reaching Rs 28,000 crore in data revenue in FY28 without further acquisitions. Overall, it is building in a 9 per cent data revenue CAGR over FY25-28, with data revenue reaching Rs 25,000 crore by FY28.

"We continue to believe the management’s expectation of returning to 23-25 per cent Ebitda range over the medium term remains a tall ask and build in a more gradual margin expansion to 22 per cent by FY28," it said.

The brokerage has ascribed 9 times June 2027 EV/Ebitda to the company's data business and 5 times EV/Ebitda to its voice and other businesses. "We ascribe an Rs 3000 crore (or Rs 104 per share) valuation to TCOM’s 26 per cent stake in STT data centers. Our SoTP-based target price remains unchanged at INR1,660," it said.

At the analyst meet, the company management highlighted various initiatives and opportunities it sees in monetising digital fabric. Tata Communications also expects the focus on M&A and non-core asset divestment to continue.

"TCOM’s guidance deferral was largely along expected lines, as the ask rate for achieving it by FY27 was becoming quite steep. We view it as a non-event and maintain estimates. We continue to see TCOM as an exciting play, offering the best of both the worlds—stability of telecom and growth potential of the IT Services sector. Maintain ‘BUY’ with a target price of Rs 2,000 (earlier Rs 1,900)," Nuvama said.

The brokerage said it continues to be positive on the unique technology and telecom play, expecting digital growth and consolidated margins to pick up sharply in FY26, leading to strong growth over FY26E/27E. 

"We are valuing the Digital/Core/Others businesses at 12.0 times/9.5 times/4.0 times based on FY27E EV/Ebitda; maintain ‘BUY’," it said.