Tag - 5G

30 May

A three-dimensional approach to 5G -TCS

Update on the Indian Equity Market:

On Monday, NIFTY closed in the green at 16,661 (+1.9%), led by M&M (+5.0%), TITAN (+4.9%), and INFY (+4.6%). KOTAKBANK (-2.0%), JSWSTEEL (-1.9%), and SUNPHARMA (-1.7%) were few of the laggards. Among the sectoral indices, CONSUMER DURABLES (+4.2%), REALTY (+4.1%), and IT (+3.9%) led the gainers, and there were no losers for the day.

Excerpts of an interview with Mr. N Ganapathy Subramanium, Chief Operating Officer, TCS published in Business Standard on 30th May 2022:

  • The annual report outlines the company’s ambition to reach USD 50bn revenue. Currently, TCS has 600,000 employees with revenues of USD 25bn. It doesn’t want to double the employees to double its revenues, so there is an element of nonlinearity there. The company doesn’t just want to work with clients, it wants a play in the ecosystem.
  • TCS wants to create systems that give real-time information.
  • Metaverse is currently a hype cycle. If it succeeds, the COO would like TCS to be present in that segment as well.
  • TCS will continue to enter unchartered territories. Currently, it is not present in B2B businesses, it may get into consumer businesses in the future.
  • BFSI, being one of the early adopters of technology consumes the largest amount of technology talent and resources. Almost every aspect of banking is changing and demand for transformative solutions in the banking space is at an all-time high.
  • TCS is the largest provider of technology services and has a solid play in the BFSI segment. About 30-35 percent of the world’s population uses the company’s product. In insurance as well, it has built a solid platform, with about 20-25mn policies administered across major markets.
  • Many Indian insurance companies use the TCS platform for processing policies and claims, in both life and non-life.
  • Discussions with clients don’t seem to suggest the peak is over for the IT sector.
  • For FY22, the total contract value (TCV) stood at USD 11.3bn. The quarterly run rate is USD 8-9bn. A year back, it was USD 6-7bn. The company’s focus is on getting the deals, irrespective of the size.
  • TCS is supporting several customers in rolling out the 5G network. Its approach to 5G is three-dimensional. First act as a systems integrator to integrate, deploy the network, and operate it for telco customers. Second how to help enterprises build a private 5G network within their facilities. Third, leverage the two network layers to build vertical applications on top of it. The company’s strength is in software, and with more networks getting softwarised TCS will have a bigger role to play beyond applications.

Asset Multiplier Comments

  • Post FY22 earnings, the management alluded that tech spending continues to remain strong and believes it would be the last to be cut despite an economic downturn. The company is focusing on tech integration led hyperscaler deals in its Industry 4.0 initaitive helping it win more transformational deals.
  • Deal wins across segments, reduction in subcontractor costs and better realisation would likely drive revenue growth in the medium term, while employee costs and attrition are likely to be a drag.

Consensus Estimates: (Source: market screener and investing.com website)

  • The closing price of TCS was ₹ 3,380/- as of 30-May-2022.  It traded at 29x/ 25x/ 23x the consensus earnings estimate of ₹ 118/ 133/ 146/- for FY23E/FY24E/FY25E respectively.
  • The consensus target price of ₹ 3,939/- implies a P/E Multiple of 27x on the FY25E EPS estimate of ₹ 146/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By IT, TCS , , 0 Comments Read more...
28 Dec

CP Gurnani’s plan for Tech Mahindra amid Covid-19 uncertainty

Update on the Indian Equity Market:

On Tuesday, the benchmark index NIFTY 50 closed at 17,233 (+0.9%), 147 points higher. Among the sectoral indices, CONSUMER DURABLES (+1.4%), AUTO (+1.3%), and PSU BANK (+1%) led the gainers and there were no losers today. Among the NIFTY50 components, SUNPHARMA (+3.1%), ASIANPAINT (+2.8%), and M&M (+2.6%) were the top gainers while POWERGRID (-0.34%) and INDUSINDBK (-0.27%) led the laggards.

Excerpts of an interview with Tech Mahindra’s CEO and Managing Director CP Gurnani with Business Standard on 25th December 2021:

  • 50% of revenues for TECHM come from telecom service providers and the telecom ecosystem. The 3 factors that would really help telecom grow are; the first one being network up-gradation to 5G, second- newer platforms that will drive consumption of telecom and the third one which is the most dominant according to Mr. Gurnani is that the more work from home happens the more everyone would appreciate the importance of network service providers.
  • TECHM has not abandoned the ORAN (Open Radio Access Network), it is just that the number of players in this space has increased. Other than Rakuten, Microsoft, VMware, and Mavenir have come up with their own ORAN ecosystems. TECHM is definitely committed but to remain neutral, it was important for them to not be seen as execution partner to one. So, their strategy is to not be a product company but execute with some of the leading players.
  • There is a new way of managing networks which has become a theme for telcos. All the players in the telecom sector are trying to find viable alternate proofs of concept at a certain scale and volume and Mr. Gurnani believes that they are execution partner to every player including Airtel and Jio.
  • Talent is an industry-wide issue at this point as consumption from IT service providers, global technology and start-ups have increased. There is definitely a talent war going on.
  • TECHM anticipated the talent issue and opened offices in Tier 2 cities in Coimbatore, Vizag, Thiruvananthapuram, Indore, Nagpur, Calcutta, and Bhuvneshwar. So, the focus is on people’s preferences to work from their home locations.
  • TECHM has now opened offices in Vietnam, Bangladesh, and in the Eastern European block. As a strategy they are trying to catch young talent, train them and participate in their career development.
  • Work from the office is voluntary at Tech M till December-end due to safety reasons. A survey of TECHM’s employees showed that those below the age of 35 want to come to the office, 35-50 age group is leaning towards a hybrid model and 50 and above prefer working from home. TECHM’s work policy will be formed taking into account their client and employee needs.
  • TECHM will continue to try and be among the top 3 IT services companies in India.

Asset Multiplier Comments

  • We think Healthy deal wins, traction in the communication segment led by legacy modernization, 5G, customer care, automation, network, and cloud will help drive revenues.
  • Higher offshoring, synergies in portfolio companies, automation & operating leverage to help margin expansion going forward.

Consensus Estimate: (Source: market screener and Tikr website)

  • The closing price of Tech Mahindra was ₹ 1,806/- as of 28-December-2021. It traded at 28x/25x/22x the EPS estimates of ₹ 64/73/81/- for FY22E/FY23E/FY24E respectively.
  • The consensus target price of ₹ 1,794/- implies a P/E Multiple of 22 on FY24 EPS estimate of ₹ 81/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Tech M , , 0 Comments Read more...