The Q4FY08 results of Tulip Telecom (formerly Tulip IT Services) were ahead of our expectations, fuelled by a stronger-than-anticipated performance in the IP/VPN business segment.
The company added 23,366 connects in the segment against our estimate of 16,524 connects. Also, while we expected a 26.7% y-o-y decline in Average revenue Per User (ARPUs), the fall was limited to 18.9%. The downslide in ARPUs is expected to continue in FY09 and FY10 as the company increases its presence in rural areas.
Considering the out-performance during the quarter and a stronger outlook for connect additions, we are raising our revenue and EPS estimates for FY09 and FY10.
Consequently, we are also increasing our one-year target price for the stock from Rs1,392 to Rs1,558 and keep BUY recommendation on the stock.