Idea Cellular (Q3 FY13)

India Infoline News Service | Mumbai |

Idea reported 5% qoq revenue growth (est +3.5% qoq) led by 5.2% volume rise, in line with our forecast for a 4.5% total MOU growth

CMP Rs113, Target Rs117, Upside 3.8% 
  • Idea reported 5% qoq revenue growth (est +3.5% qoq) led by 5.2% volume rise, in line with our forecast for a 4.5% total MOU growth  
  • RPM fell 0.5% qoq to 41.1p against our estimate for a 0.5% qoq rise as VAS contribution fell 100bps to 14.6% post implementation of TRAI’s VAS regulations from Sep’ 12
  • Higher network opex (+5.7% qoq) due to full quarter impact of diesel price hike & increased advertising and subscriber acquisition costs (to meet the new guidelines on subscriber acquisition) offset benefit of lower customer churn at 6.9% and reduced gross adds; access charges also increased 7% qoq due to rising component of ILD minutes which pulled up the average cost/min. Accordingly, EBIDTA margin fell 36bps qoq to 26.4% vs our estimate of flat margin
  • PAT below our estimate of ~Rs2.6bn but included Rs133mn in FX loss due to INR depreciation vs FX gain of Rs180mn in Q2 FY13
  • Capex for the quarter at Rs6.5bn (ex FX fluctuation and 2G spectrum payouts) while capex guidance for FY13 cut to Rs30bn from Rs35bn earlier due to lower than budgeted minutes on network  
  • Q3 results portray a mixed picture as EBIDTA trailed volume-driven revenue growth due to cost pressures and lower VAS contribution; we believe an inevitable rev/min improvement over next few quarters would help support PAT growth even as regulatory risks and cost pressures persist; we roll over our EV/EBIDTA valuation to FY15 but retain Market Performer with revised 9-mth target of Rs117 (earlier Rs100). 
Results table
(Rs m) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Net sales 55,786 53,140 5.0 50,308 10.9
Access and I/C charges (10,183) (9,506) 7.1 (8,457) 20.4
Network opex (14,209) (13,449) 5.7 (12,182) 16.6
License fees (5,897) (5,647) 4.4 (5,611) 5.1
Personnel costs (2,731) (2,779) (1.7) (2,424) 12.7
S G & A  expenses (8,033) (7,534) 6.6 (8,189) (1.9)
Operating profit 14,734 14,225 3.6 13,446 9.6
OPM (%) 26.4 26.8 (36) bps 26.7 (32) bps
Depreciation (8,836) (8,526) 3.6 (7,575) 16.6
Interest (2,416) (2,164) 11.7 (2,880) (16.1)
PBT 3,482 3,536 (1.5) 2,991 16.4
Tax (1,196) (1,136) 5.3 (981) 21.9
Effective tax rate (%) 34.4 32.1 224 bps 32.8 155 bps
PAT 2,286 2,400 (4.8) 2,010 13.7
PAT margin (%) 4.1 4.5 (42) bps 4.0 10 bps
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 194,887 221,166 243,155 266,152
yoy growth (%) 26.2 13.5 9.9 9.5
Operating profit 50,399 58,609 66,381 73,192
OPM (%) 25.9 26.5 27.3 27.5
Reported PAT 7,230 9,326 13,699 15,985
yoy growth (%) (19.6) 29.0 46.9 16.7
         
EPS (Rs) 2.2 2.8 4.1 4.8
P/E (x) 51.7 40.1 27.3 23.4
P/BV (x) 2.9 2.7 2.4 2.2
EV/EBITDA (x) 10.1 9.1 7.8 7.3
Debt/Equity (x) 1.1 1.1 0.9 0.9
BSE 95.15 1.20 (1.28%)
NSE 95.15 1.25 (1.33%)

***Note: This is a NSE Chart

 

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