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