The stock of Tejas Networks (TNL) scaled new highs and touched Rs472 (up 11%) on BSE after the company announced that it has successfully completed supply and deployment of over 40,000 GPON equipment for BharatNet Phase-I Project.
BharatNet is an ambitious Government of India (GoI) project to bring high-speed broadband connectivity to 250,000 gram panchayats in the country.
The company added that BharatNet is one of the largest greenfield rollouts of a GPON-based broadband network in the world. Gigabit Passive Optical Network (GPON) is the highest speed, longest life, lowest cost network infrastructure of fiber optical cable used for Internet, voice over Internet protocol (VoIP) and other services like Wi-Fi hotspots and distributed antenna systems (DAS) over the short haul.
As per TNL’s RHP, TNL is the second largest company in the Indian Optical Equipment Market with a market share of ~15%. It designs, develops and sells high-performance and cost-competitive products to Communication Service Providers that includes telecommunications service providers, internet service providers, utility companies, defense companies and government entities. Apart from the scope of work from growth in optical capex by
Telecom operators in India, the further stages of the ambitious project will drive revenue growth for the company. This is because the project is carried out by a special purpose vehicle, Bharat Broadband Network Ltd (BBNL).
BBNL was of one of the leading contributors to TNL’s top-line growth in FY17, and the Finance Minister’s decision to increase the budget for the project from Rs6,000 crore in FY17 to Rs10,000 crore for FY18 augurs well for the company as it derives a significant proportion of revenues from repeat businesses. The company is well placed in terms of funding its working capital requirements and meet its R&D personnel salaries post the
Rs450cr IPO in June 2017. At the current market price of Rs459 the stock is trading at ~26x its FY20E EPS.
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