Tulip Telecom recorded a 12.8% y-o-y growth in its 4QFY2009 topline, while sequential growth came in at 5.9%.
It was the key Corporate Network / Data Services Business (MPLS-based IP VPN), yet again, that was the major growth driver for Tulip. This business clocked an impressive 48.5% y-o-y growth, touching nearly Rs350 crore in revenues (Rs234.8cr in 4QFY2008).
Sequentially, this business rose by 4.1% (Rs335cr in 3QFY2009). On the other hand, the Network Integration Business saw a 36.3% y-o-y decrease in revenues, which touched Rs113cr (Rs177.4cr in 4QFY2008).
However, on a sequential basis, this business grew by a strong 12.3% (Rs100.7cr in 3QFY2009). The IP VPN Business contributed a significant 75.5% to Tulip Telecom’s unconsolidated revenues in 4QFY2009, as compared with 57% in 4QFY2008 and 76.9% in 3QFY2009.
Outlook and valuation
Going ahead, we expect Tulip to record CAGRs of 21.6% and 16.7% in its topline and bottomline, respectively, over FY2009-11E. Adjusted Net Profit, however, is expected to grow at a CAGR of 10% over the period.
We have forecasted largely stable margins over the period. We expect the IP VPN Business to remain the major growth driver for the company and have modeled for a 27.8% CAGR growth in this business over the mentioned period, which we believe is conservative. This is as against a superlative 141.2% CAGR recorded by the business over FY2006-09.
Going ahead, the company has significant opportunities to tap in the field of rural connectivity, such as financial inclusion, education, e-governance and the major unique identification project announced recently. These initiatives can provide upside risks to our estimates.
At the CMP, the stock is trading at 8.1x FY2011E adjusted EPS. We recommend an ACCUMULATE on the stock with a Target Price of Rs938, implying a P/E of 9x FY2011E adjusted EPS.