Tulip Telecom – ‘Well Connected’ – BUY
CMP Rs172, Target Rs214, Upside 24.7%
Tulip Telecom is amongst the leading enterprise service providers catering to data connectivity needs of corporates. It has an 11% share of the Rs75bn enterprise data services market (EDM) and a dominant 30% of MPLS VPN, the fastest growing segment of EDM. From a network integrator, Tulip has emerged as a one-stop-shop for the entire gamut of telecom services, a fact highlighted by >80% share of data connectivity in revenues. With fibre/wireless last mile connectivity in place, Tulip represents a pure-play on the enterprise data market, slated to be a US$3.3bn opportunity by 2013. We project a ~14% EPS CAGR coupled with stable margin over FY10-12. Initiate with a BUY as the stock trades below historic PER of ~9x, for an upside of 25%.
