Suyog Telematics Ltd (STL): Company Stock Analysis

Suyog Telematics Ltd is an Indian company engaged in providing infrastructure services to the telecommunications sector. Founded in 1995, the company specializes in the installation, operation, and maintenance of wireless communication towers, particularly for mobile networks. Its core business revolves around offering telecom operators and other wireless service providers a range of services related to tower infrastructure, including leasing and shared infrastructure solutions.

The company’s primary revenue stream comes from renting out its telecom towers to mobile network operators (MNOs), allowing them to expand network coverage without having to invest in building and maintaining their own infrastructure. This model helps telecom operators minimize capital expenditure and focus on their core business.

Suyog Telematics has a robust portfolio of telecom towers located strategically across India, focusing on urban and semi-urban areas where mobile and internet penetration is rapidly increasing. This infrastructure is essential for facilitating seamless mobile communication, 4G, and emerging 5G technologies.

Over the years, the company has expanded its operations in response to the growing demand for data and voice services in India. It plays a critical role in India’s digital transformation by supporting telecommunications companies in enhancing connectivity, which is crucial for economic growth, especially in an era of digital inclusion and smart cities.

The company is listed on Indian stock exchanges and has a steady growth trajectory due to its long-term contracts with leading telecom players. Suyog Telematics Ltd continues to contribute significantly to the telecommunications ecosystem by offering essential infrastructure that enables efficient and reliable communication networks across the country.

Ventura – 11 Oct 2024

STL – High growth plays on the strategic 5G infrastructure

The 4G/5G infrastructure rollout has not kept pace with the onboarding of 4G/5G connections. It is estimated that for seamless connectivity close to 1.2 Mn (macro and micro) towers would be required in addition to significant fiber connectivity, to provide a truly seamless network infrastructure. In addition to this FTTH penetration is miniscule and portends a huge opportunity.

Suyog Telematics Ltd (STL), a passive telecom infrastructure play is best placed to benefit from this.
We expect STL’s revenue to grow at a CAGR of ~50% to INR 545 crore by FY27 driven by
• Increase in revenue from Macro sites to INR 227cr (37%CAGR) on the back of INR 500cr to increase installation to ~8000 tenancy from the current 542 tenancy.
• Increase in revenue from Micro sites to INR 228 cr (45%CAGR) on the back of INR  420 cr to increase installation to ~14000   tenancy from current 3818 tenancy.
• Laying of 15,000 fiber kms to generate revenue of INR 76 cr (61%CAGR) on further fiberization of towers
• FTTH installations to reach 7,50,000 homes leading to revenue generation of INR 15 cr.

As a result, we expect EBITDA/PAT to grow at a 44%/35% CAGR to INR 364cr/157cr by FY27.
EBITDA/PAT margins are expected to decline by 678 bps / 587 bps to ~67% /~32%.
Return ratios ROE and ROIC are expected to dip initially on account of heavy capex taking time to realize and settle around 21%/22%.

Over the period FY24-27, STL will incur a capex of ~ 900 cr which is to be funded via Internal accruals recent fund raise and warrants issued to promoters of 60cr.

We initiate coverage on STL with a BUY for a price target of INR 2,779 per share (47X FY27 P/E) representing an upside of 78% from CMP of 1580 over the next 24-30 months.