Idea reported yet another stellar set of numbers with significant beat on revenues, EBIDTA and PAT driven by robust traffic and realization growth coupled with margin expansion
Volumes growth strong at 5.2% qoq on the back of +8.6% in the previous quarter while pricing too surprised on the upside at +3.4% qoq
Blended 2G+3G data vols rise 19% qoq while data pricing improves 4% qoq after four quarters of decline
Margins expand 154bps qoq on operating leverage tailwind; better than expected topline and EBIDTA performance leads to a large PAT beat
A strong quarter with all round beat on estimates but we refrain from raising target multiple as twin risks of higher renewal payout and impending Reliance Jio entry weighs on incumbents; retain BUY with revised 9-12mth target of Rs170
|(Rs m)||Q1 FY15||Q4 FY14||% qoq||Q1 FY14||% yoy|
|Access and I/C charges||(11,444)||(11,011)||3.9||(10,951)||4.5|
|S G & A expenses||(8,972)||(9,152)||(2.0)||(7,699)||16.5|
|OPM (%)||33.2||31.7||154 bps||31.8||145 bps|
|Effective tax rate (%)||35.1||34.1||94 bps||35.7||(64) bps|
|PAT margin (%)||9.6||8.4||126 bps||7.1||255 bps|
Stellar beat on all counts; revs up 7.3% qoq, PAT +23.5% qoq
Idea reported yet another stellar set of numbers with all round beat on our estimates. Q1 FY15 revenues rose 7.3% qoq vs our estimate of 2.9% qoq driven by volumes (traffic up 5.2% qoq) and pricing (+3.4% qoq). EBIDTA margin of 33.2% posted ~150bps qoq improvement boosted by operating leverage and came much ahead of our forecast of 31.4%. Although interest costs rose less than expected at 19.2% qoq, reported PAT of ~Rs7.3bn saw a large beat on our estimate of ~Rs5.5bn driven by better revenue and operating performance.
Revenues up 7.3% qoq on robust volume, pricing
Idea Q1 revenues grew 7.3% qoq and 15.6% yoy vs our expectation of +2.9% qoq and 10.8% yoy respectively. The large topline beat was driven by robust traffic growth as total MOUs jumped 5.2% qoq (vs est. 2.5% qoq) on the back of an even stronger 8.6% sequential growth in the previous quarter. Realization (rev/min) growth of 3.4% qoq mitigate concerns on sustainability of pricing uptick that had surfaced after Q4 rev/min drop of ~3% qoq.
Blended data vols jump ~19% qoq, data price rises after 4 Qs of decline
Blended data (2G+3G) volumes grew ~19% qoq to 32.5bn MBs of which 3G data volumes at 15.7bn MBs grew at 20% qoq. Blended data pricing (avg rev/MB) jumped 4% qoq after four quarters of decline and has exhibited only the second uptick in the past 8 quarters. While overall data usage/sub remained flat sequentially, 3G usage amongst 3G sub base surged 15.6% qoq to 534MB with an increase in 3G ARPU to Rs142 from Rs111 in Q4 FY14. Although blended churn rose to 4.6% from 4.2% in Q4 and post paid churn virtually doubled to 4.9% from 2.5% in the previous quarter, company clarified in its conference call that the headline jump is due to a definition change and on a comparable basis churn not much changed from previous quarter.
Key operating highlights
|Parameters||Q2 FY13||Q3 FY13||Q4 FY13||Q1 FY14||Q2 FY14||Q3 FY14||Q4 FY14||Q1 FY15|
|Subscribers (' 000)||115,500||113,900||121,600||125,000||127,200||128,700||135,800||139,000|
|MOU per user (mins)||359||384||406||398||368||376||397||401|
|Total MOU (mn mins)||125,646||132,181||143,366||147,315||138,827||144,571||157,055||165,239|
|3G sites (Node B)||14,467||15,545||17,140||17,481||18,031||19,904||21,381||22,516|
|VAS % of service rev||15.6||14.6||15.2||16.0||16.1||16.1||16.5||17.8|
|Data % of service rev||5.4||5.7||6.6||7.2||8.7||9.5||10.1||11.5|
|Non data VAS||10.2||8.9||8.6||8.8||7.4||6.6||6.4||6.4|
|Total data subs (mn)||18.9||21.8||26.2||30.9||33.6||25.5||25.3||27.9|
|Data vol (mn MB)||8,744||10,040||11,421||13,791||17,452||20,840||27,299||32,516|
|of which 3G data vol (MB)||-||-||5,231||6,334||7,578||9,469||13,084||15,719|
|Blended data ARMB (paise)||32.1||31.0||33.9||33.5||31.0||29.6||25.3||26.3|
|Data ARPU/data sub (Rs)||50||52||55||54||55||91||104||108|
|Data usage/sub MB||157||167||163||160||178||309||410||409|
|3G usage/3G sub (MB)||-||-||385||398||429||427||462||534|
|3G data ARPU/3G sub (Rs)||-||-||105||109||116||112||111||142|
|Post paid churn||3.0||3.2||2.9||3.6||2.8||3.0||2.5||4.9|
Retain BUY on strong execution record, data upsides; renewal px remain key risk
Idea reported yet another quarter of strong execution which saw robust volume and pricing growth and on the post earnings call too it expressed optimism on pricing trends; we expect company to beat industry metrics in the coming quarters as well. However our key concern on near term spectrum renewal risks remain since Idea is likely to have the largest payouts compared to peers in future auctions. Additionally Reliance Jio’s impending entry would be a key event risk for all incumbents. Hence despite a strong quarter with all round beat, we do not expect a valuation rerating and marginally raise our 9-12mth target to Rs170 (earlier Rs165) with minor tweaks to FY15/16 estimates.
|Y/e 31 Mar (Rs m)||FY13||FY14||FY15E||FY16E|
|yoy growth (%)||15.0||18.3||16.4||14.6|
|yoy growth (%)||39.8||94.7||15.9||11.2|
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