Vindhya Telelinks Ltd
(BSE Code: 517015) (CMP: Rs.879.30) (FV: Rs.10) (TGT: Rs.1000+)
Vindhya Telelinks Ltd (VTL) operates in two segments - Cables and engineering, procurement and construction (EPC). The ‘Cables’ segment manufactures and markets telecommunication cables, other types of wires and cables and FRP rods/glass rovings, among others. The ‘EPC’ segment undertakes and executes contracts and provides services with or without materials. Its enterprise solutions include structured cables and telecom fibre accessories. Its products include optical fibre cables (OFCs) such as multi-tube ribbon type cable and drop cable; copper telecom cables such as signalling cables, aerial bunched cable and jumper wire; speciality cables such as electroplated tinned copper wire; and optical fibre ribbon.
Digitization: The ‘Digital India’ programme, which will be powered by National Optical Fibre Network (NOFN) project as the triumph of Digital India rests on the robustness of the telecom sector. NOFN, which is now rechristened as ‘Bharat Net’, aims to cover the countryside through a broadband network to connect 2,50,000 gram panchayats with a bandwidth of 100 mbps (megabits per second) by laying more than 1 million kms of OFC. Implementation of the NOFN project is gaining momentum leading to higher volumes of OFC consumption.
Roll Out 4G Telecom Services: Private sector telecom service providers are upgrading their networks to offer highspeed 4G telecom services. The acquisition of additional spectrum will drive network expansion by incumbent operators as well as investments in telecom infrastructure. Further, high-speed data networks will drive backhaul fiberisation. The government’s ‘Smart Cities’ project will be the key enabler for investments in broadband infrastructure. VTL continues to focus on its strategic initiative of realigning its product portfolio towards the emerging demand of OFCs from various new applications including for the Fibre-To-The-Home (FTTH) roll out by leading 3G/4G service providers and fiberisation of telecom towers. It has transformed itself into more of an EPC player than just a cable manufacturer. Its EPC division currently concentrates on three primary business verticals - Telecom, Power and Sewerage Projects, which contribute ~60% of revenue.
On other financial parameters, the Company’s top-line and bottom-line are growing at ~40% and ~50% respectively; RoE is above 20%; D/E ratio is below 0.5x. Also, the Company is generating healthy operating cash flows.
Technical Outlook: The Vindhya Telelinks Ltd stock looks very good on the daily chart for medium-term investment. It has broken out of its ascending triangle pattern and trades above all important DMA levels on the daily chart. Start accumulating at this level of Rs.879.30 and on dips to Rs.830 for medium-to-long-term investment and a possible price target of Rs.1000+ in the next 6 months.