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%
Source: Company, India Infoline Research
Financial Summary
- 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.
| (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 |
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 |
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