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| India Infoline Research Team / 12:26 , May 31, 2011 |
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CMP Rs213, Target Rs232, Upside 8.9%
- Tcom standalone revs up marginally 2% yoy (-1.6% qoq) while lower opex and other costs supported 144bps (+221bps qoq) expansion in margin to 24.8%; reported PAT up ~11% qoq but lower 68% yoy due to Rs2.2bn interest on tax refund included in Q4 FY10
- Neotel continues to be drag on consolidated performance-Tcom’s FY11 share of Neotel losses widened to Rs5.5bn vs Rs4.6bn in FY10; albeit, Q4 loss moderated to Rs1.6bn vs ~Rs2bn in Q3 FY11 and Rs4.2bn a year ago; consolidated revenues up 3.2% (+1.7% qoq); continued decline in N/W costs drove 986bps yoy surge in margin (+126bps qoq)
- Tcom has made conscious efforts to diversify from its core wholesale voice business and tap the higher margin managed services and cloud business; however, we believe impact on revenues and EBIDTA may be back-ended even as Neotel continues to exert pressure at consol level; narrow our FY12/13 loss estimates but retain MP with a revised 9-mth SOTP tgt of Rs232 (earlier Rs245)
Analyst meet takeaways
- In FY11, company carried ~40bn (16% share) international voice mins, up 25% yoy while voice net rev/min down 23% yoy to US¢46 after a 37% fall in FY10; wholesale remains a cash cow although it has to contend with fierce competition and falling net rev/min; Tcom also has 42 data centres with >1mn sq ft of space
- Capex: Tcom guided for US$400-450mn capex in FY12 ex-Neotel but cash capex would be lower; FY11 capex at US$298mn (12% of gross revenues). Neotel investment till FY11 at US$250mn
- Debt: FY11 gross consol debt ex-Neotel at US$1.6bn vs US$1.4bn last year while net debt stood at US$1.4bn
- Neotel update: FY11 total revenues up 37% yoy to US$321mn; A US$6bn addressable market opportunity leaves tremendous scope for expansion; Neotel may turn EBIDTA +ve in the current year
Results table (consolidated)
| (Rs m) |
Q4 FY11 |
% yoy |
% qoq |
FY11 |
% yoy |
| Net sales |
30,688 |
3.2 |
1.7 |
119,320 |
8.2 |
| Network costs |
(17,926) |
(5.3) |
(1.5) |
(71,280) |
10.2 |
| Operating & other exp. |
(5,003) |
(9.6) |
1.0 |
(19,511) |
(2.8) |
| Personnel costs |
(4,203) |
(11.6) |
7.5 |
(16,273) |
5.9 |
| Operating profit |
3,557 |
590.2 |
14.1 |
12,256 |
21.1 |
| OPM (%) |
11.6 |
986 bps |
126 bps |
10.3 |
109 bps |
| Depreciation |
(3,913) |
(14.5) |
1.2 |
(15,483) |
2.5 |
| Interest |
(953) |
(30.0) |
(36.2) |
(5,176) |
(0.6) |
| Other income |
653 |
- |
(5.4) |
2,011 |
68.2 |
| PBT |
(657) |
(88.4) |
(57.7) |
(6,393) |
(28.9) |
| Tax |
(100) |
(83.0) |
(52.1) |
(688) |
- |
| Minority Int/Associates |
(192) |
47.9 |
(11.2) |
(790) |
34.0 |
| Adjusted PAT |
(948) |
(85.1) |
(52.0) |
(7,871) |
(3.5) |
| Extra ordinary items |
(671) |
- |
- |
(671) |
- |
| Reported PAT |
(1,619) |
(61.2) |
(18.0) |
(8,542) |
42.9 | Source: Company, India Infoline Research
Q4 FY11 standalone
| (Rs m) |
Q4 FY11 |
% yoy |
% qoq |
FY11 |
% yoy |
| Net sales |
8,636 |
2.1 |
(1.6) |
34,090 |
5.9 |
| Operating profit |
2,138 |
8.4 |
8.0 |
8,429 |
12.9 |
| OPM (%) |
24.8 |
144 bps |
221 bps |
24.7 |
153 bps |
| PBT |
684 |
172.0 |
4.3 |
2,253 |
147.4 |
| Tax |
(219) |
(74.1) |
10.2 |
(692) |
- |
| Adjusted PAT |
465 |
- |
1.7 |
1,561 |
(41.1) |
| Extra items |
40 |
(98.1) |
- |
40 |
- |
| Reported PAT |
506 |
(68.2) |
10.5 |
1,602 |
(66.9) | Source: Company, India Infoline Research
Financial summary
| Y/e 31 Mar (Rs m) |
FY10 |
FY11E |
FY12E |
FY13E |
| Revenues |
110,256 |
119,320 |
132,468 |
143,577 |
| yoy growth (%) |
10.7 |
8.2 |
11.0 |
8.4 |
| Operating profit |
10,124 |
12,256 |
14,042 |
16,224 |
| OPM (%) |
9.2 |
10.3 |
10.6 |
11.3 |
| Pre-exceptional PAT |
(10,795) |
(7,870) |
(6,380) |
(5,504) |
| Reported PAT |
(5,977) |
(8,541) |
(6,380) |
(5,504) |
| yoy growth (%) |
- |
42.9 |
(25.3) |
(13.7) |
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| EPS (Rs) |
(21.0) |
(30.0) |
(22.4) |
(19.3) |
| P/BV (x) |
1.6 |
1.9 |
2.3 |
2.9 |
| EV/EBITDA (x) |
14.0 |
12.5 |
11.1 |
9.6 |
| Debt/Equity (x) |
1.6 |
2.3 |
2.9 |
3.5 | Source: Company, India Infoline Research
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