Why Tejas Networks Share Price is Rising

Shares of telecom equipment maker Tejas Networks are in focus of late, rising as much as 20% in the past five trading sessions.

Tejas Networks share price touched a new 52-week high of 880 earlier this week.

In August 2021 when the Tata group initially invested in Tejas Networks, shares of the company were on a roll and rallied up to 450% within a year.

Tejas Networks has once again started to show strong bullish momentum and investors are wondering whether they could see a similar rally witnessed two years ago.

Let's find out why the Tata group company's shares are on uptrend and what's in store for the remainder of 2023.

Why Tejas Networks share is rising

#1 Anticipation of Q1 results

With the biggest order in the history of the company received from BSNL, the performance of Tejas Networks is expected to turn around.

In May this year, state-run BSNL issued an advanced purchase order worth over Rs 150 billion (bn) to a consortium led by Tata Consultancy Services (TCS) for the deployment of 4G network across the country. Tejas Networks is part of the TCS-led consortium. It will supply and service the Radio Access Network (RAN) equipment to BSNL.

Tejas Networks is expected to report quarterly numbers for the quarter ended June 2023 next week on 21 July 2023.

Industry experts suggest that Tejas Networks can give a good quarter. The losses are expected to come down and the company may soon turn profitable.

Stocks rallying in anticipation of strong quarterly results is a common phenomenon.

After the sharp rally in Tejas Networks, the exchanges sought clarification from the company on the increase in volume. The company reverted by saying that they do not have any information or announcements to share which have a bearing on the price or volume behavior.

Growth in telecom sector

A robust telecommunications infrastructure is now an essential service for delivering high-speed connectivity to people, homes, offices and governments.

The global movement towards everything digital and proliferation of powerful mobile devices is driving the global demand for all-pervasive, higher capacity fiber optic networks.

The telecom and internet service providers are investing heavily towards capex to upgrade their mobile, access and optical networks and this presents a robust growth opportunity for telecom industry.

A combination of factors such as increased adoption of highspeed home broadband, availability of newer generations of mobile broadband technologies, bandwidth-intensive applications such as high-speed business Ethernet, cloud connectivity, high-capacity wireless backhaul, and data center inter-connections are resulting in an expansion of the telecom equipment market.

The continuing global trend of increased data consumption by consumers, enterprises and intelligent web-enabled devices (IoT) is a favourable driver for Tejas Networks' business.

Tejas Networks' business with Tata tele business

Tejas Networks has been deployed to provide broadband solutions to Tata tele business services. It will deploy TJ1400 family of carrier-class Fiber to the-x (FTTx) and Packet switching network solutions to deliver high speed fiber connectivity services to businesses across the country.

Tata Tele business services is a leading digital solutions provider offering a comprehensive portfolio of data and voice managed services to enterprises.

The company's strong emphasis on R&D

The company continues to increase its spendings towards research and development (R&D) that aligns with their growth plan.

Being a technology business, the company continued to maintain its focus on R&D and innovation, to ensure that the company invests and builds globally competitive products.

During financial year 2023, the company invested 28% of the revenue (on a fully expensed basis) on R&D, while increasing the R&D headcount by more than 60%.

The company has significantly expanded the product portfolio, which now consists of optical and packet transport, fiber access (FTTX), as well as wireless (4G/5G/ SATCOM) products, which can be used to build an end-to-end telecom network.

Favourable Policy Environment in India for Domestic Telecom Product Companies

The India Government's focus on building an "Atmanirbhar Bharat" in core technology areas is expected to benefit domestic telecom equipment companies like Tejas Networks with strong R&D capabilities and in-house Intellectual Property Rights (IPR).

Both Central and State Governments in India are investing in telecommunications infrastructure projects such as Bharatnet Phase-II and III and Smart and Safe Cities, which have a significant telecom component.

Healthy financials can support growth

For the financial year ended March 2023, Tejas Networks reported a strong 67% growth in revenue at Rs 9.2 bn. The net loss came down to Rs 364 m as against the previous year's loss of Rs 627 m.

Tejas Networks is also a debt free company.

The cash balance at the end of the year stood at Rs 13.1 bn. This healthy cash position will help the 5G company execute large orders and scale up business.

The company's order book is at an all-time high of Rs 19.3 bn. This provides good revenue visibility and also raises prospects of a new order pipeline, which can significantly accelerate growth in the financial year 2024.

How Tejas Networks shares have performed recently

In the past one month, Tejas Networks share price has gained 20%.

The shares have gained 44.4% in the last one year.

It reached a 52-week high of Rs 880 on 14 July 2023. Tejas Networks has a 52 week low of Rs 459 touched on 26 July 2022.

About Tejas Networks

Tejas Networks is among the earliest telecom product companies that has built homegrown technology products in networking and optical backhaul crucial for high speed broadband.

It was incorporated in the year 2000.

The company designs and manufactures optical transmission products, which find application in cellular backhaul, high-speed broadband and backbone network of telecom service providers for transportation of data and voice over optical fiber.

The company's products are also used in defense communication networks and by utility companies.

Tejas Networks successfully completed its IPO in June 2017 and is a listed company.

To know more, check out Tejas Networks company fact sheet and quarterly results.

For a sector overview, read our telecom sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...