Tejas Networks Q1FY25 Concall Highlights
Mcap: INR 240.28bn | CMP: INR 1,405
Outlook: Tejas Networks has an order book of INR 70.91bn (~2.9x of FY24 revenue), which shows business visibility. The company has scaled up RAN manufacturing capacity and can further scale up/down due to the asset-light model. The company is ramped up in supplying wireless equipment and BSNL installations are progressing well and expected to complete by the end of the year. BharatNet Phase 3 and the BEAD program in the US will be the key opportunity for the company.
Arihant Capital Markets Ltd
Order book
The order book stood at INR 70.91bn (+271% YoY/-14% QoQ) in Q1FY25. Domestic and International mix stood at 96:4.
BharatNet Phase 3
BharatNet phase 3 tender is in the advanced stage and the company has the opportunity.
In BharatNet Phase 3, the company is focused on equipment like GPON, IP impulse routers, etc. Initially, more than INR 300bn spending and 9%-10% for equipment budget are expected. The company can able to address INR 40-50bn equipment tenders for the initial phase.
BSNL
In wireless, 4G/5G RAN Installations are progressing well for BSNL networks and shipped equipment to 27,000 sites.
Asset-light model
The company has an asset-light model and signed up with multiple EMS companies for manufacturing. The company has a final integration and testing facility in the Bangalore factory. The company can able to scale up/down based on the business environment.
The company also scaled up RAN manufacturing capacity.
Working capital
The increase in inventory is due to ramping up wireless shipments. Inventories will be converted to finished goods and shipped in upcoming months. Post wireless project completion working capital intensity will come down by the end of the year.
PLI
The company has realized PLI incentives of INR 667mn in Q1FY25.
Wireline
In Wireline, the company won deals with Tier-2 operators in the US for network modernization applications and operators in SE Asia for broadband rollout.
GPON, DWDM, and PTN equipment have witnessed continuous purchases from private operators in international markets.
Merger
The merger of Saankhya Labs with Tejas is in the advanced stage and NCLT has reserved the matter for orders.
Data Centers
The company has an opportunity in data center interconnect applications. For switches, the company is building campus networks and enterprise networks.
Revenue mix
The revenue mix is India Private (90%), India government (7%), International (3%). India's private revenue is majorly dominated by BSNL 4G related shipments to TCS.
Other highlights
The company has opportunities for expansion of BSNL 4G, backhaul network, BharatNet, Kavach, broadband, wireless and metro aggregation.
The increase in network traffic due to an increase in AI applications, interconnectivity, multiplayer gaming, virtual reality special computing, and advanced communication systems will be key growth drivers.
The company is targeting to modernize old networks in the US. BEAD program for broadband connectivity will be the opportunity.
Around 20%-30% spent on 4G compared to 5G. 5G deployment is smaller and expected to happen in harbor areas initially.
The technology transition happens in 5 years.
The competitors are Nokia, Cisco, and Ericsson.
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