Reliance Communications (Q4 FY12)

India Infoline News Service | Mumbai |

Rcom reported a better than expected revenue growth of 3.6% qoq (est +2.4% qoq) driven by 3.7% rise in global business sales (vs est +2%)

CMP Rs67, Target Rs70, Upside 4.5% 
  • Rcom reported a better than expected revenue growth of 3.6% qoq (est +2.4% qoq) driven by 3.7% rise in global business sales (vs est +2%)
  • Wireless revenue growth of 1.3% qoq was subdued compared to our expectation of sequential 2.2% rise; however, company clarified that on like to like basis, excluding the tower revenues from Etisalat, wireless revenues would have grown by 4.3% qoq
  • Wireless traffic (total MOUs) growth of 3.1% was ahead of our +2% estimate but lagged Bharti’s 5.1% qoq increase; RPM fell 1.3% qoq to 44p and is line with that reported by Bharti
  • EBIDTA margin at 26.6% (down 228bps qoq) came in below our estimate largely due to higher than expected network opex which the company attributed to regular year end maintenance expenses; higher than estimated interest cost was negated by tax credit to the tune of Rs1.2bn and higher other income which led to a 78% qoq jump in reported PAT
  • Rcom guided for FY13 capex of Rs15bn and reiterated its view that peak capex is firmly behind with incremental spending on network capacity, quality of service etc; it intends to remain FCF +ve in the current fiscal.
  • Rcom continues to pursue asset monetization strategies namely Infratel stake sale and IPO of undersea cable assets (FLAG) in Singapore which would help lower the substantial net debt of Rs358bn residing on balance sheet; post FY12 results, we have lowered our EBIDTA/PAT estimates and do not foresee any near term triggers for the stock; retain Market Performer with revised 9-mth tgt of Rs70 (earlier Rs86).  
Results table
(Rs m) Q4 FY12 Q3 FY12 % qoq
Net sales 50,100 48,380 3.6
Access & license fees (8,396) (9,055) (7.3)
Network opex (18,390) (14,957) 23.0
Staff (3,082) (2,940) 4.8
SG&A (6,910) (7,458) (7.3)
Operating profit 13,322 13,970 (4.6)
OPM (%) 26.6 28.9 (228) bps
Depreciation (9,703) (9,780) (0.8)
Interest (5,795) (3,812) 52.0
Other income 3,000 2,170 38.2
PBT 824 2,548 (67.7)
Tax 1,193 (141) -
Effective tax rate (%) - 5.5 -
Minority/Associates 1,287 (546) -
Adjusted PAT 3,304 1,861 77.5
Adj. PAT margin (%) 6.6 3.8 275 bps
Extra ordinary items 12 - -
Reported PAT 3,316 1,861 78.2
Source: Company, India Infoline Research
Note: OPM excludes other income and hence differs from that reported by company  
 
Financial summary
Y/e 31 March (Rs m) FY11 FY12E FY13E FY14E
Revenues 224,304 196,770 217,324 230,344
yoy growth (%) 4.3 (12.3) 10.4 6.0
Operating profit 84,043 57,853 65,415 69,794
OPM (%) 37.5 29.4 30.1 30.3
Pre-exceptional PAT 7,771 9,283 7,703 9,793
Reported PAT 16,021 9,283 7,703 9,793
yoy growth (%) (65.6) (42.1) (17.0) 27.1
         
EPS (Rs) 7.8 4.5 3.7 4.7
P/E (x) 8.7 14.9 18.0 14.2
P/BV (x) 0.3 0.4 0.4 0.4
EV/EBITDA (x) 5.7 8.4 6.8 5.6
Debt/Equity (x) 1.0 1.0 0.8 0.7
ROE (%) 1.9 2.4 2.1 2.6
ROCE (%) 2.8 3.2 4.0 4.1
Source: Company, India Infoline Research
BSE 11.26 [0.37] ([3.18]%)
NSE 11.30 [0.35] ([3]%)

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