Tulip Telecom (Q4 FY12)

India Infoline News Service | Mumbai |

Higher interest cost and lower EBIDTA led to 41% qoq decline in PBT though a tax write back of an earlier excess provision led to a tax income and consequently ~15% qoq drop in PAT

CMP Rs79, Target price Rs71, Downside 11%

  • Tulip reported disappointing Q4 results as delay in fresh order inflow and rebates to existing customers led to 3.6% qoq dip in revenues while margin also fell 343bps weighed down by pricing pressure in a competitive landscape
  • In the short term, company has guided for flat revenues (though volumes could improve) while margins could see a ‘progressive decline over next few quarters owing to challenging outlook’; company says it would continue to focus on lowering costs through rationalization-additional responsibility for existing employees but expects staff strength to be stable
  • Higher interest cost and lower EBIDTA led to 41% qoq decline in PBT though a tax write back of an earlier excess provision led to a tax income and consequently ~15% qoq drop in PAT
  • Company has guided for Rs4-4.5bn in capex for Tulip Telecom while DC business capex pegged at Rs2bn; total debt at end of Mar’ 12 stood at Rs24bn, cash at Rs700mn; net debt increased by Rs1.9bn in Q4
  • We had earlier pegged FY13/14 revenue growth in the region of 14-15%; however, post Q4 results we have scaled down drastically our revenue growth estimates to mid-single digit in light of tough macro outlook and tepid guidance from the company. EBIDTA margins too are likely to decline given a weak or no growth scenario. In addition, debt overhang remains a continuing concern. We also change our estimates to reflect the changed accounting year to Oct-Sep (from current Apr-Mar). Downgrade the stock to SELL with revised 9-mth tgt of Rs71.
Results table (consolidated)
(Rs m)
Q4 FY12
Q3 FY12
% qoq
Q4 FY11
% yoy
Net sales
6,617
6,866
(3.6)
6,380
3.7
Traded good/scvs
(4,276)
(4,338)
(1.4)
(3,992)
7.1
Staff cost
(364)
(337)
7.8
(275)
32.3
SG&A
(285)
(200)
42.5
(247)
15.8
Operating profit
1,692
1,991
(15.0)
1,866
(9.3)
OPM (%)
25.6
29.0
(343) bps
29.3
(368) bps
Depreciation
(604)
(526)
15.0
(479)
26.3
Interest
(537)
(427)
25.7
(267)
101.2
Other income
68
10
554.9
(11)
 
PBT
618
1,048
(41.1)
1,110
(44.3)
Tax
43
(276)
-
(283)
-
Effective tax rate (%)
-
26.3
-
25.5
-
PAT
660
773
(14.5)
827
(20.1)
PAT margin (%)
10.0
11.3
(127) bps
13.0
(298) bps
Source: Company, India Infoline Research
 
Q4 order input break up
Segment
%
Data Connectivity
62
Managed Services (including DCs)
29
Network Integration
9
Source: Company
 
Financial snapshot: Tulip Data Centres
Rs mn
Q4 FY12
Operating profit
(30)
Fixed assets
2,502
Goodwill
1,244
Net current assets
303
Capital employed
3,526
Equity funds
2,140
Source: Company
 
Financial summary
Y/e 31 Mar (Rs m)
FY10
FY11
FY12E*
FY13E
Revenues
19,664
23,511
39,759
27,867
yoy growth (%)
21.8
19.6
69.1
(29.9)
Operating profit
5,255
6,631
10,676
7,329
OPM (%)
26.7
28.2
26.9
26.3
Pre-exceptional PAT
2,537
3,064
3,643
2,011
Reported PAT
2,743
3,064
3,643
2,011
yoy growth (%)
9.7
11.7
18.9
(44.8)
 
 
 
 
 
EPS (Rs)
18.9
21.1
25.1
13.9
P/E (x)
4.2
3.7
3.1
5.7
P/BV (x)
1.2
0.9
0.7
0.6
EV/EBITDA (x)
3.8
4.0
3.6
4.7
Debt/Equity (x)
1.3
1.5
1.8
1.5
ROE (%)
31.5
28.6
26.1
12.0
ROCE (%)
21.0
19.1
20.1
10.8
Source: Company, India Infoline Research
*company has changed accounting year to Oct-Sep and hence FY12 reflects a 18-month period

BSE 1.53 0.05 (3.38%)
NSE 3.95 [0.20] ([4.82]%)

***Note: This is a NSE Chart

 

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