Tejas Network - Buy

 

Company reported a net loss of Rs 10 cr in Q3 FY23 as against a net loss of Rs 24 cr posted in Q3 FY22.

Revenue from operations zoomed 156.4% to Rs 274 cr Vs  Rs 107 cr recorded in the same period a year ago.

The company reported a pre-tax loss of Rs 5 cr  as compared to a pre-tax loss of Rs 32.91 crore reported PY

Total expenses up 92.27% year on year to Rs 300 cr in Q3 FY23. Cost of materials consumed was at Rs 160 cr (up 155.31% YoY) and employee expenses stood at Rs 68.66 crore (up 118.94% YoY) 

Tejas Network shares - gone up by 35% on yearly basis, gone up by   23% in the last 6 months and in the last 1 month went up by 5%

Company is expected to well as the outlook for the products is robust order book of Rs.1,431 crores for optical and fibre products.

Any declines in the price will present a golden opportunity to add the blue chip share to your portfolio.

Tejas Networks

Company Background :

Tejas Networks Ltd. is a provider of carrier grade communications equipment and solutions for telecom industry. The Company is a supplier of optical networking equipment to telecom carriers across the world. Its equipment is used by various service providers to build broadband networks, in addition to support traditional voice networks. The Company offers various products, such as TJ1400, TJ1600, TJ1400P, TJ1400 PTN, TJ1100, TJ1270, TJ100ME, TJ1500, TJ1600 and TJ5500. 

The Company offers various solutions for third generation (3G) backhaul; enterprise connectivity, including Ethernet Private Line (EPL), Ethernet Virtual Private Line (EVPL), E-Tree and Ethernet Virtual Private Tree (EVP-Tree); cable multi system operators; government broadband; campus applications, and Wholesale Ethernet, among others. It offers a portfolio of Carrier Ethernet aggregation equipment for Ethernet wholesale. Its technology facilitates various applications, such as video calls and mobile television. Source - Investing.com

Financial Performance :

Tejas Networks Ltd (TNL) is the second largest company in the Indian optical equipment market. It sells products to internet service providers and telecom, defence companies and government entities. TNL would be a beneficiary of increased data traffic for telecom operators, thus requiring continuous optical capex in a bid to remain competitive in an increasing competition environment. It also stands to benefit from being the only Indian optical network equipment company. 

Government’s capex under initiatives like BharatNet Project should aid its revenues, as project SPV, Bharat Broadband Network Ltd, is a key contributor to TNL’s revenues. Allocated spends of Rs10,000cr on the project in this Budget would also support revenue growth. TNL has advantages vs. global companies owing to low cost manufacturing. Higher revenue growth and resultant operating leverage should aid EBITDA margins. Overall, we estimate revenue CAGR of 17.2%, EBITDA margin expansion of ~160bps and PAT CAGR of 27.8% over FY18E-20E.

Stock Performance:

During the last 1 year the scrip has given following returns 

The scrip has touched a low of 247 and a high of 472  

1 year - minus 23.95%
6 months - minus 20.63%
3 months - minus 1.32%
1 month - 28.48%
1 week - 10.15%

Recommendation :

Buy and add to your long term portfolio.  In the short term 175 will be a good resistance point.  The scrip may correct in the short term, and Rs.150 is the support level in case of a correction.  Hold long term for a Target price of 200 in next 12 months and 250 for 18 months holding in view of the revenue and profit visibility.

The scrip will have wild movements on either side.  No point in buying on peaks, wait patiently for declines and buy.

Raghav
Equity Research Analyst

Smart Investor 
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