Reliance Communications (Q3 FY13)

India Infoline News Service | Mumbai |

As expected, EBIDTA margin remained flat as increased SG&A expenses balanced by lower staff costs while lower minority share payout led to 3% qoq rise in reported PAT though much below our estimate of Rs1.2bn

CMP Rs82, Target Rs60, Downside 26.8%
  • Rcom Q3 revenue growth of 2.1% qoq came in line with our estimate of Rs51.4bn driven by 2.1%/0.9% qoq rise in wireless/GEBU business revenues
  • Mobile revenue posted 2.1% qoq increase, marginally below our forecast for a 2.6% rise even as RPM rose a better than expected  ~2% qoq; traffic (total MOUs) however, remained tepid despite H2 being seasonally strong for operators
  • As expected, EBIDTA margin remained flat as increased SG&A expenses balanced by lower staff costs while lower minority share payout led to 3% qoq rise in reported PAT though much below our estimate of Rs1.2bn  
  • Debt reduction remains the key focus area and reported news flow on this front would probably drive near term stock performance; moreover, base tariff hike to 1.5p/sec across all circles would also support RPM improvement though its impact on volume growth in the coming quarters remains to be seen. We tweak our FY13/14 estimates, introduce FY15 forecasts and downgrade the stock to SELL with 9-mth target of Rs60 (earlier Rs54).  
Results table
(Rs m) Q3 FY13 Q2 FY13 % qoq Q3 FY12 % yoy
Net sales 51,360 50,310 2.1 48,240 6.5
Access & license fees (9,760) (9,512) 2.6 (9,050) 7.8
Network opex (15,997) (15,582) 2.7 (14,957) 7.0
Staff (3,184) (3,443) (7.5) (2,940) 8.3
SG&A (7,539) (7,101) 6.2 (7,458) 1.1
Operating profit 14,880 14,672 1.4 13,835 7.6
OPM (%) 29.0 29.2 (19) bps 28.7 29 bps
Depreciation (9,337) (9,130) 2.3 (9,780) (4.5)
Interest (6,054) (5,929) 2.1 (3,780) 60.2
Other income 1,650 1,710 (3.5) 2,280 (27.6)
PBT 1,139 1,323 (13.9) 2,555 (55.4)
Tax - - - (140) -
Minority/Associates (87) (302) (71.2) (550) (84.2)
PAT 1,052 1,021 3.0 1,865 (43.6)
PAT margin (%) 2.0 2.0 2 bps 3.9 (182) bps
Source: Company, India Infoline Research

Financial summary
Y/e 31 March (Rs m) FY12 FY13E FY14E FY15E
Revenues 196,770 204,836 212,955 223,855
yoy growth (%) (12.3) 4.1 4.0 5.1
Operating profit 57,850 61,861 66,016 70,738
OPM (%) 29.4 30.2 31.0 31.6
Reported PAT 9,280 4,875 6,186 7,596
yoy growth (%) (31.0) (47.5) 26.9 22.8





EPS (Rs) 4.5 2.4 3.0 3.7
P/E (x) 17.8 33.9 26.7 21.7
P/BV (x) 0.4 0.4 0.4 0.4
EV/EBITDA (x) 9.4 8.8 8.0 7.1
Debt/Equity (x) 1.0 1.0 1.0 0.9
ROE (%) 2.3 1.3 1.7 2.0
ROCE (%) 3.1 3.7 3.6 3.7
Source: Company, India Infoline Research
BSE 11.86 [0.06] ([0.50]%)
NSE 11.85 [0.05] ([0.42]%)

***Note: This is a NSE Chart

 

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