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Tanla Platform Ltd

Result Synopsis

Tanla Platform (TANLA) reported inline financial performance for the quarter. Both, sequential revenue growth and EBITDA margin were inline with estimates. It reported sequential revenue growth of 2.2% QoQ, led by 2% increase in the revenue of Enterprise business and 4.1% QoQ increase in revenue of Platform business. Trubloq processed 82bn message in Q2 with more than 60% volume market share. There was sequential increase in EBITDA margin(up 101 bps QoQ) as operating margin has started recovering after getting adversely affected in Q1FY23.

It is a credible play on the rising demand for CPaaS solutions across industries for achieving enhanced customer engagement. Also, increase in smartphone penetration and greater regulatory push towards mandatory SMS alerts would drive CPaaS market. As per industry reports, the Global CPaaS market is expected to grow at CAGR of 29% from CY20 to CY25E, led by faster adoption of multichannel communication. The adoption of CPaaS based A2P messaging across industries continues to drive volume growth for both enterprise and platform segments of Tanla. Rising share of higher margin platform segment would drive EBITDA margin of the company. We estimate revenue CAGR of 14.0% over FY22?24E with average EBIT margin of 18.2% over the period. We maintain our BUY rating on the stock with revised target price of Rs 1,046/share based on P/E of 22x(unchanged valuation multiple) on FY24E. The stock trades at P/E of 20.1x/14.2x on FY23E/FY24E.

Result Highlights

? Reported revenue of Rs 8,696mn (up 2.2% QoQ, down 1.7% YoY). Enterprise revenue was down 3.4% YoY (up 2.0% QoQ), while Platform business grew 18.8% YoY (up 4.1% QoQ).

? The gross margin for enterprise business grew from 17.2% in Q2FY23 to 17.9% in Q3FY23, while gross margin on Platform business dipped from 96.5% in Q2FY23 to 96.0% for the quarter.

? Added 210 new customers for 9M FY23 contributing Rs322 million. 31% of new customers have been added in WhatsApp. Trubloq processed 82bn message in Q3.

? EBITDA margin increased by 101 bps QoQ (down 552 bps YoY) to 17.4% for the quarter.

? PAT increased by 5.5% QoQ, supported by lower taxation and finance cost.

? Cash & Cash Equivalents at ?7,680 million and negative Free cash flow of ?565 million.

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