Idea Cellular (Q1 FY13)

India Infoline News Service | Mumbai |

Idea had 3.1mn active 3G subscribers with average usage of 375MB and incremental ARPU of Rs88 as of Q1 FY13

CMP Rs78, Target Rs100, Upside 28.2% 
  • Idea Q1 revenues were in line though the underlying composition showed mixed performance; traffic growth slowed to +5.3% qoq (but ahead of our +4.5% forecast) while RPM declined by a worse than expected 2.4% qoq to 41.2p (vs est -0.6% qoq); rev/min decline implies it is now just 1.5% above its low of 40.6p touched in Q4 FY11
  • Strong revenue momentum of Q3/Q4 FY12 was halted as tariff activity remained elevated and due to the introduction of a consumer protection regulation by TRAI at end of Q4 FY12; rev/min decline was also due to part absorption of service tax hike effective from Q1 FY13. Company expects industry growth to be muted in H1 FY13
  • Idea had 3.1mn active 3G subscribers with average usage of 375MB and incremental ARPU of Rs88 as of Q1 FY13; it also upped its revenue market share to 15% in Q4, an increase of 140bps in 1 year
  • Although reported EBIDTA margin was up 81bps, on an adjusted basis after accounting for Rs1.5bn one-off items in Q4, OPM declined 192bps qoq. Staff costs rose 7.5% qoq due to one time change in gratuity policy
  • Reported PAT at Rs2.3bn was lower than expected on higher deprecation (by Rs480mn, on revision of useful life of some fixed assets) and interest expenses; interest cost includes Rs245mn in FX loss due to INR depreciation compared to gain of Rs135mn in Q4
  • Q1 capex stood at Rs4.1bn (12% of full year guidance) while net debt was at ~Rs115bn; company indicated in its earnings call that capex would pick up in H2 FY13 as volumes typically improve in the seasonally strong H2 for telcos  
  • We remain cautious on volume growth in Q2 though H2 could see a revival; however, more than any specific operational metrics, we believe regulatory uncertainty remains the biggest overhang on the stock. Albeit, in view of Q1 results, we lower our PAT estimates for FY13/14 due to higher depreciation impact (additional Rs1.8bn in FY13) and smaller margin gain over FY12-14. Accordingly, we revise lower our 9-mth tgt to Rs100 (earlier Rs106) but retain BUY. 
Q1 FY13 results
(Rs m) Q1 FY13 Q4 FY12 % qoq Q1 FY12 % yoy
Net sales 55,037 53,697 2.5 45,207 21.7
Access and I/C charges (9,687) (9,144) 5.9 (7,321) 32.3
Network opex (13,406) (12,579) 6.6 (11,783) 13.8
License fees (6,017) (7,373) (18.4) (5,116) 17.6
Personnel costs (2,740) (2,548) 7.5 (2,110) 29.8
S G & A  expenses (8,832) (8,483) 4.1 (6,837) 29.2
Operating profit 14,355 13,571 5.8 12,040 19.2
OPM (%) 26.1 25.3 81 bps 26.6 (55) bps
Depreciation (8,325) (7,844) 6.1 (7,026) 18.5
Interest (2,670) (2,275) 17.4 (2,463) 8.4
PBT 3,361 3,453 (2.7) 2,551 31.8
Tax (1,019) (1,063) (4.1) (778) 31.0
Effective tax rate (%) 30.3 30.8 (45) bps 30.5 (17) bps
Reported PAT 2,341 2,390 (2.0) 1,773 32.1
PAT margin (%) 4.3 4.5 (20) bps 3.9 33 bps
Source: Company, India Infoline Research
 
Financial Summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues 154,384 194,887 236,208 275,676
yoy growth (%) 24.5 26.2 21.2 16.7
Operating profit 37,260 50,399 62,595 75,259
OPM (%) 24.1 25.9 26.5 27.3
Reported PAT 8,987 7,230 10,543 18,285
yoy growth (%) (5.8) (19.6) 45.8 73.4
         
EPS (Rs) 2.7 2.2 3.2 5.5
P/E (x) 28.7 35.7 24.5 14.1
P/BV (x) 2.1 2.0 1.8 1.6
EV/EBITDA (x) 10.1 7.8 6.6 5.2
Debt/Equity (x) 1.0 1.1 1.1 0.9
ROE (%) 6.5 5.5 7.8 12.2
BSE 93.85 1.05 (1.13%)
NSE 93.95 1.15 (1.24%)

***Note: This is a NSE Chart

 

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