WOW India - Tanla Solutions - Emkay

Broking House - Enam Securities (P) Ltd
Recommendation - Buy
Provider of integrated telecom infrastructure solutions; mainly targets exponentially growing non-voice mobile messaging and Data Services market
In its report dated 10th Jan 2007 Emkay Private Client Research (Emkay) initiates Buy on Tanla Solutions Ltd (TSL) at a CMP of Rs. 395 with a target price of Rs. 613.

Emkay informs us that TSL is the provider of integrated telecom infrastructure solutions and products space. According to Emkay TSL''s main growth comes from the Aggregator Services (messaging applications & billing services), which accounted for around 68% of its revenue for H1FY07.

Emkay highlights that TSL has got strong domain expertise in the non-voice Mobile telephony industry; the company business is mainly targeted at exponentially growing non-voice mobile messaging and Data Services market. Emkay further points that in FY06, Aggregators business constitutes 53% of the revenue and for H1FY07 it constitutes 68% of the revenue, whereas Telecom Signaling Solutions and offshore Development Services contributed 35% and 12% in FY06 and for H1FY07, 21% and 11% respectively.

Emkay states that over the years, with TSL''s strong domain focus and enriching client''s relationships has reflected in the impressive financials and operational performance. Emkay believes that TSL enjoys a impressive business model coupled with robust industry environment and also with its future plans to enter newer geographies and extending the services and product offering, would reflect in a CAGR of 92% in revenue to Rs 443 cr over FY06A- 09E, with net profits to grow at a CAGR of 79% to Rs 172.05 cr in the same period.

At the current valuation of 16x FY08E and 11.5x FY09E earning and 9.4 xFY08E and 6.3xFY09E EV/EBIDTA, Emkay rates TSL stock a BUY with a target price of Rs 613.

Thanks HK