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Idea Cellular (Q2 FY14)

India Infoline News Service | Mumbai |

Idea Q2 results were a mixed bag with revenues/EBIDTA miss but compensated by better than estimated PAT of ~Rs4.5bn

CMP Rs172, Target Rs200, Upside 16.3%

  • Idea Q2 results were a mixed bag with revenues/EBIDTA miss but compensated by better than estimated PAT of ~Rs4.5bn


  • Revenues declined 3.3% qoq (expected -2.5%) on the back of a larger than estimated 5.8% qoq drop in traffic (est -1.5% qoq); Volumes seem to be impacted by an unusually strong seasonality headwind accentuated by a rising share of rural subscribers. Certain minutes on network have also vanished due to lower incremental subscriber additions


  • Pricing posted a pleasant surprise, rising 2.3% qoq coming on the back of a 6.1% rise in Q1, as company reaps benefits of clampdown on promotional minutes; VAS share remained mostly flat at 16.1% in Q2 though data VAS continues its upward journey with share of 8.7%. Non data VAS share declined to 7.4% and remains under pressure due to new TRAI regulation of double confirmation as well as threat from free messenger and chat OTT applications


  • EBIDTA margin declined 58bps qoq to 31.2% impacted by higher network opex and staff costs; however lower interconnect charges (due to reduced network minutes and change in roaming agreements) offset some of the cost increase; PAT of Rs4.5bn was ahead of our estimates due to lower interest expenses 


  • Net debt fell to ~Rs93bn translating in to FY14E net debt/EBIDTA of ~1.2x while capex during the quarter stood at Rs8.8bn; co retained FY14 capex guidance of Rs35bn ex-spectrum related payouts


  • We remain +ve on the stock on possibility of reduced spectrum prices and return of traffic growth in H2 FY14 as well as improvement in return profile (RoE, RoCE) over FY13-15; retain BUY for unchanged 9-12mth target of Rs200. 

Results table
(Rs m)
Q2 FY14
Q1 FY14
% qoq
Q2 FY13
% yoy
Net sales
63,233
65,388
(3.3)
53,140
19.0
Access and I/C charges
(9,563)
(10,951)
(12.7)
(9,506)
0.6
Network opex
(15,862)
(15,436)
2.8
(13,449)
17.9
License fees
(6,959)
(7,465)
(6.8)
(5,647)
23.2
Personnel costs
(3,482)
(3,073)
13.3
(2,779)
25.3
S G & A  expenses
(7,651)
(7,699)
(0.6)
(7,534)
1.6
Operating profit
19,715
20,763
(5.0)
14,225
38.6
OPM (%)
31.2
31.8
(58) bps
26.8
441 bps
Depreciation
(10,795)
(11,353)
(4.9)
(8,526)
26.6
Interest
(1,949)
(2,211)
(11.8)
(2,164)
(9.9)
PBT
6,971
7,200
(3.2)
3,536
97.2
Tax
(2,495)
(2,573)
(3.0)
(1,136)
119.7
Effective tax rate (%)
35.8
35.7
6 bps
32.1
367 bps
Adjusted PAT
4,476
4,627
(3.3)
2,400
86.5
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m)
FY12
FY13
FY14E
FY15E
Revenues
194,887
224,074
BSE 166.90 0.80(0.48%)
NSE 166.90 0.80(0.48%)
As on: 01 Jan 70, 05:30

***Note: This is a Chart









 

 
 
 
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