Idea Cellular (Q3 FY14)

India Infoline News Service | Mumbai |

Data pricing witnessed further pressure as avg realized rate/MB fell by 4.5% qoq to 29.6p but volumes improved 19% qoq to 20.8bn MBs.

CMP Rs139, Target Rs200, Upside 43.9%

  • Idea Q3 headline numbers were weaker than expected especially EBIDTA margin which was flat qoq vs expectation of 90bps rise qoq

  • Revenue growth of 4.6% qoq (vs est +4.9% qoq) was driven by 4.1% sequential growth in traffic (est +5.2% qoq) and 0.4% qoq jump in rev/min, slightly lower than forecast of +0.7%

  • EBIDTA margin was mostly flat qoq as company ramped up ad spends that nullified the beneficial impact of lower network opex and staff costs qoq; depreciation was higher due to additional charge of ~Rs600mn resulting from a revision in useful life of assets; reported PAT came in much below estimate on EBIDTA miss though the impact was cushioned by lower than anticipated interest expense

  • Data subs (2G+3G) fell ~24% qoq to 25.5mn as company eliminated reporting of incidental users (<100Kb usage in 30 days) which boosted data ARPU to Rs91 vs Rs55 in previous quarter; data VAS accounted for 9.5% of service revenues while share of non data VAS continues to decline and now stands at 6.6%

  • Data pricing witnessed further pressure as avg realized rate/MB fell by 4.5% qoq to 29.6p but volumes improved 19% qoq to 20.8bn MBs.   

  • Net debt fell to ~Rs89.5bn while capex during the quarter stood at Rs10.2bn; co retained FY14 capex guidance of Rs35bn ex-spectrum related payouts

  • We tweak our earnings estimates on the back of 9M FY14 results and also introduce FY16 forecasts; the stock has corrected recently on the back of fears of heightened competitive intensity in upcoming auctions though this provides an attractive entry point in our view; reiterate BUY with unchanged 9-12mth target of Rs200 

Results table
(Rs m)
Q3 FY14
Q2 FY14
% qoq
Q3 FY13
% yoy
Net sales
66,131
63,233
4.6
55,786
18.5
Access and I/C charges
(10,090)
(9,563)
5.5
(10,183)
(0.9)
Network opex
(16,423)
(15,862)
3.5
(14,209)
15.6
License fees
(7,232)
(6,959)
3.9
(5,897)
22.6
Personnel costs
(3,445)
(3,482)
(1.1)
(2,731)
26.2
S G & A  expenses
(8,384)
(7,651)
9.6
(8,033)
4.4
Operating profit
20,557
19,715
4.3
14,734
39.5
OPM (%)
31.1
31.2
(9) bps
26.4
467 bps
Depreciation
(11,666)
(10,795)
8.1
(8,836)
32.0
Interest
(1,575)
(1,949)
(19.2)
(2,416)
(34.8)
PBT
7,316
6,971
4.9
3,482
110.1
Tax
(2,639)
(2,495)
5.8
(1,196)
120.6
Effective tax rate (%)
36.1
35.8
28 bps
34.4
171 bps
PAT
4,677
4,476
4.5
2,286
104.6
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs m)
FY13
FY14E
FY15E
FY16E
Revenues
224,074
 

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