Tejas Networks stock surged over 20% recently

Tejas Networks has seen a significant recovery in its stock value, jumping from ₹1 lakh to over ₹20 lakh since March 2020. This surge has raised questions about whether this trend will continue. Recently, the company received a financial boost with ₹123.45 crore in production-linked incentives from the Indian government. This funding is part of the 'Make in India' initiative and has contributed to a 20% increase in stock price since the announcement on March 13. The company, backed by the Tata Group, has grown due to its strong research and development (R&D) focus. Tejas Networks has a solid presence in global optical and data networking markets, providing services to clients in over 75 countries. R&D consumes a large part of its budget, with around 60% of its workforce engaged in these efforts, resulting in approximately 450 patents. In recent years, Tejas has fulfilled major projects, contributing to a rapid expansion in its order book and revenues. It reported a significant revenue jump in the nine months leading to December 2024, reflecting a 4.7 times increase from the previous year. However, a large part of its revenue comes from collaborations with government-related entities, leading to challenges in cash flow and inventory management. Despite its success, the company experienced a decline in its order book through December 2024. It recently secured new contracts, but the overall picture shows fluctuations in revenue visibility and profitability. These challenges may affect sustained stock price increases down the line. While the company explores growth opportunities in the expanding 5G market and other sectors, the path ahead still holds uncertainties. Speculative interest has recently driven stock price movements, but fundamental improvements in the business are crucial for long-term success. Analysts believe the stock may see further growth, with a target price indicating a potential increase of over 35%.