Buy Tanla Platform Ltd. For Target Rs.1,400 By Yes Securities
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Muted operating performance for the quarter
Result Synopsis
Tanla Platform (TANLA) reported muted financial performance for the quarter. The sequential revenue growth and EBITDA margin were below expectation. It reported sequential revenue growth of (0.6%) QoQ, led by (0.7%) QoQ decrease in the revenue of Enterprise business and 0.5% QoQ increase in revenue of Platform business. There was sequential decrease in EBITDA margin (down 28 bps QoQ) on higher SG&A.
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 estimates, the Global CPaaS market is expected to grow at CAGR of 20% plus 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 15.7% over FY23?26E with average EBIT margin of 18.6% over the period. We maintain our BUY rating on the stock with revised target price of Rs 1,400/share based on P/E of 20x on FY26E. The stock trades at P/E of 18.1x/14.9x on FY25E/FY26E.
Result Highlights
? Reported revenue of Rs 10,026mn (down 0.6% QoQ, up 15.3% YoY). Enterprise revenue was down 0.7% QoQ (up 14.6% YoY), while Platform business grew 0.5% QoQ (up 22.5% YoY).
? The gross margin for enterprise business decreased from 20.0% in Q2FY24 to 19.5% in Q3FY24, while gross margin on Platform business decreased from 97.7% in Q2FY24 to 97.5% in Q3FY24.
? EBITDA margin decreased by 28 bps QoQ (up 183 bps YoY) to 19.2% for the quarter.
? PAT decreased by 1.4% QoQ to Rs 1,406mn, led by lower revenue.
? Cash & Cash Equivalents at Rs 6,162 million as of December 31, 2023.
? The Board of Directors have declared an interim dividend of ? 6 per share.
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SEBI Registration number is INZ000185632
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