Reliance Communications (Q3 FY14)

India Infoline News Service | Mumbai |

Rcom Q3 PAT missed our estimate on lower sales, larger than expected margin decline and higher finance costs

CMP Rs120, Target Rs105, Downside 12.5%
  • Rcom Q3 PAT missed our estimate on lower sales, larger than expected margin decline and higher finance costs

  • Net revenues (ex-other income) declined 3.8% qoq led by 4.3% qoq drop in global operations revenue (largely due to ~16% qoq decrease in global voice revs)  while India ops segment sales was virtually flat; Q2 included Rs4.4bn in one offs not present in Q3 leading to lower other income

  • EBIDTA margin fall of 359bps qoq was much worse than estimated on the back of higher staff and access charges though previous quarter margin benefited from one offs; India ops EBIDTA margin declined 90bps qoq

  • Voice total MOUs rose 0.4% qoq and rev/min inched up 0.2% qoq while churn too declined 250bps qoq to 3.4%; total data traffic jumped 10.2% qoq but VAS % of telecom revs remained flat at ~23% 

  • Reported PAT was much below  our estimate on revenue/EBIDTA miss and higher interest costs

  • We revisit our FY14/15 earnings estimates and introduce FY16 forecasts but lack of near term catalysts  leads us to retain our Sell reco with revised 9-12mth target of Rs105 (earlier Rs115).

Results table
(Rs m) Q3 FY14 Q2 FY14 % qoq Q3 FY13 % yoy
Net sales 51,570 53,610 (3.8) 51,360 0.4
Access & license fees (10,350) (9,510) 8.8 (9,760) 6.0
Network opex (15,538) (16,288) (4.6) (15,997) (2.9)
Staff (2,510) (2,240) 12.1 (3,180) (21.1)
SG&A (7,187) (7,032) 2.2 (7,539) (4.7)
Operating profit 15,985 18,540 (13.8) 14,884 7.4
OPM (%) 31.0 34.6 (359) bps 29.0 202 bps
Depreciation (9,480) (9,370) 1.2 (9,340) 1.5
Interest (7,490) (6,760) 10.8 (6,050) 23.8
Other income 2,460 4,740 (48.1) 1,650 49.1
PBT 1,475 7,150 (79.4) 1,144 28.9
Tax (30) (10) - - -
Minority/Associates (370) (390) (5.1) (90) 311.1
PAT 1,075 6,750 (84.1) 1,054 2.0
PAT margin (%) 2.1 12.6 (1,051) bps 2.1 3 bps
Source: Company, India Infoline Research
Note: Net sales excludes other income

Financial summary
Y/e 31 March (Rs m) FY13 FY14E FY15E FY16E
Revenues 205,610 221,872 242,291 258,781
yoy growth (%) 4.5 7.9 9.2 6.8
Operating profit 59,416 67,227 75,110 82,810
OPM (%) 28.9 30.3 31.0 32.0
Reported PAT 6,707 11,125 9,903 12,703
yoy growth (%) (27.7) 65.9 (11.0) 28.3
EPS (Rs) 3.2 5.4 4.8 6.2
P/E (x) 38.5 23.2 26.1 20.3
P/BV (x) 0.8 0.7 0.7 0.7
EV/EBITDA (x) 11.4 9.6 8.2 6.9
Debt/Equity (x) 1.3 1.1 1.0 1.0
ROE (%) 0.2 3.2 2.8 3.5
ROCE (%) 3.5 5.3 5.0 5.3
Source: Company, India Infoline Research

***Note: This is a NSE Chart

 

Advertisements

  • Save upto Rs.2.67 lakh with Pradhan Mantri Awas Yojana ...Know more
  • Now Save Rs.3150 on your Demat Account ...Click here
  • Now get IIFL Personal Loan in just 8* hours...APPLY NOW!
  • Get the most detailed result analysis on the web - Real Fast!
  • Actionable & Award-Winning Research on 500 Listed Indian Companies.