Buy this small-cap multibagger IT stock, trading at 52-week low, brokerage sees 78% gains

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Outlook and stock returns

Shares of the company closed on Wednesday, July 27 at Rs 585.20 apiece after a significant drop of 20% from its previous close of Rs 730.60 apiece. It was opened at Rs 700 each. The CMP for the stock reached week 52 and is currently trading at the low of week 52.

The stock’s 52-week low was recorded today at 584.50 each. The 52-week high is Rs 2096.75 each, recorded on 17th January 2022. The PE ratio is 14.73 and the P/B ratio is 5.87. The TTM EPS is Rs 39.73 and the ROE is also negative at 39.82%.

The stock has done well in terms of ROI over the past 5 years, considering multibagger returns. However, it has not performed well over the past year, down 37.12%. In the last week, it recorded a negative of 41.68% and a month of decline of 43.07%, respectively.

Q1FY23 Earnings Highlights

Q1FY23 Earnings Highlights

The corporate segment (92% of revenue and 65% of gross profit) declined by 6.7% QoQ to Rs 7.3 billion and gross margin contracted by 639bps QoQ to 16.4%, due to the decline in volume, given the strong discount from the competition. ~64 new customers were added in Q1FY23 (73 in Q1FY22).

Platform revenue (8% of revenue and 35% of gross margin) declined 1.0% QoQ to Rs 0.68 billion, due to seasonality, while gross margin rose 142 basis points to 96.0%. The Truecaller VI and agreement will start contributing from T2FY23. Customer concentration is decreasing and T20 customers contribute 59% of revenue. The margin impact was approximately 100 basis points due to cross-currency, approximately 100 basis points due to investments and approximately 440 basis points due to customer issues. Net cash is Rs 8 billion (~ 8% of mcap).

Outlook

Outlook

The brokerage said, “We estimate +20/10% CAGR Revenue/EPS in FY22-24E, due to the addition of new enterprise clients, higher A2P volumes and Wisely’s capacity. to evolve with more partnerships.”

Margin is falling but expected to recover, buy for a target price of Rs 1040 each

Margin is falling but expected to recover, buy for a target price of Rs 1040 each

Commenting on the valuation, the brokerage said: “Margin is down but expected to recover Tanla reported a weak quarter, revenue was down due to seasonality and margin was down due to client-specific issues and… increased competition. The company’s gross margin fell 640 basis points to 16.4% (vs. our estimate of a 100 basis point decline) due to lower pricing at a large customer, the impact of exchange rates and the increase in technology investments. the platforms segment remained stable (-1.0/+22.7% QoQ/YoY). Platforms activity will continue to show strong growth, with the rise of Wisely (VI and Truecaller).”

The brokerage added, “We expect the business to see volume growth of around 15% and GM will be between 18-19% (vs. 20-21% earlier) due to the growing competition. The platform business will show 35% revenue. CAGR, with ~90% GM. Management is confident that the EBITDA margin will increase to ~19-20% over the next two quarters. We expect the margin to recover, but expect it to be below historical levels. We have reduced our EPS estimate by 10.6/9.1% for FY23/24E, thanks to a margin reset of around 200 bps. We have a BUY rating with a target price of Rs 1,040, based on FY24E EPS 22x (earlier 26x), supported by CAGR and revenue RoE of around 20% of >40%. The stock is trading at 18.6/15.4x FY23/24E EPS (~40% below the 5-year average).

About - Tanla Platforms Ltd.

About – Tanla Platforms Ltd.

Tanla Platforms Ltd., incorporated in 1995, is a small cap company with a market capitalization of Rs 7,943.83 Crore operating in the computer software sector. Tanla Platforms is engaged in providing integrated telecommunications infrastructure solutions and products. Its software development center in Hyderabad Andhra Pradesh India and its global marketing office in UK Telecom Infrastructure Solutions have been core to Tanla’s operations. Tanlas’ range of services includes product development and implementation in the wireless industry, aggregation services and offshore development services. Major products and revenue segments include software services.

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