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Tata Communications (Q2 FY13)

India Infoline Research Team / 16:45 , Nov 07, 2012

CMP Rs249, Target Rs210, Downside 15.7%

  • Tata Comm posted healthy ~27% yoy revenue growth driven by strong traction in both voice (+34% yoy) and data businesses (+25.4% yoy)

  • In voice business, ILD volumes continue to outpace industry growth at +16% yoy while net rev/min declined qoq though impacted by one-offs

  • EBIDTA margin down 388bps due to 1) regulatory impact (WiMax WPC charges and increase in license fees) 2) one time actuarial loss on Canada pension fund 3) unfavourable settlements in global voice business and 4) increased sales and investments

  • Neotel Q2 revenues grew 4.6% yoy/5.5% qoq though sequential EBIDTA did decline ~13% to Rs516mn

  • Reported loss widened to Rs2.7bn vs ~Rs1.6bn a year ago impacted by margin pressure and increased depreciation; Q1 FY13 other income included Rs1.1bn in one off income and hence reported loss figures not comparable qoq; core business net debt remain virtually unchanged at ~US$1.6bn

  • Based on H1 performance we revise our estimates but expect losses to continue to over next 2 years; retain SELL with 9-mth target of Rs210 

Results table (consolidated)
(Rs m) Q2 FY13 Q2 FY12 % yoy Q1 FY13 % qoq
Net sales 42,710 33,736 26.6 41,074 4.0
Network costs (24,043) (18,625) 29.1 (22,681) 6.0
Operating & other exp. (7,894) (5,442) 45.1 (7,061) 11.8
Personnel costs (6,380) (4,890) 30.5 (6,004) 6.3
Operating profit 4,394 4,780 (8.1) 5,328 (17.5)
OPM (%) 10.3 14.2 (388) bps 13.0 (268) bps
Depreciation (5,307) (4,340) 22.3 (5,290) 0.3
Interest (2,112) (2,519) (16.2) (2,063) 2.4
Other income 318 (19) - 1,133 (71.9)
PBT (2,708) (2,098) 29.1 (893) 203.3
Tax (189) (284) (33.6) (528) (64.3)
Minority Int/Associates 154 730 (78.9) (8) -
Reported PAT (2,742) (1,652) 66.0 (1,429) 92.0
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues 119,320 141,961 164,668 190,510
yoy growth (%) 8.2 19.0 16.0 15.7
Operating profit 12,253 17,915 21,736 26,100
OPM (%) 10.3 12.6 13.2 13.7
Reported PAT (7,769) (7,947) (6,889) (3,824)
yoy growth (%) 30.0 2.3 (13.3) (44.5)
         
EPS (Rs) (27.3) (27.9) (24.2) (13.4)
P/BV (x) 2.0 3.1 4.5 5.9
EV/EBITDA (x) 14.3 11.9 10.3 8.8
ROCE (%) (0.5) 0.7 1.7 3.3
Source: Company, India Infoline Research