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Tulip Telecom Limited
Overweight
TULP.BO, TTSL IN
Q4'FY11: Operational performance beat; watching debt
Tulip Telecom has reported a solid Q4FY11 result with revenue growth
sustained at 20% and a higher than expected EBITDA margin expansion.
Higher interest costs drove a slight bottom line miss while the investment in
the data centre increased leverage. Nevertheless management reiterated their
data centre targets and is confident of ~17% bookings by year 1. We continue
to like Tulip and see these results as confirmation of improving trends.
• Q4 revenue of INR 6,380mn, +6% Q/Q, +20% Y/Y: Q4 revenue is inline
with JPMe/consensus of INR 6,380m/INR 6,382m. Management
highlighted that connectivity in the Enterprise Data Services segment drove
growth. Also in terms of revenue, more than 80% of the new orders
received are on fibre – this is a move up from 70% in Q3. We believe that
fibre contributes 50%+ of the order book vs. the 40% reported in Q3. Fibre
penetration within the cities is continuing well according to the company.
• Healthy margin expansion: Consolidated EBITDA margin was 29.3%,
ahead of both JPMe’s 28.8% and consensus estimate of 28.5%. Margin
expanded 80bp Q/Q after the 55bp in Q3 and 90bp in Q2. Absolute EBITDA
of INR 1.87bn is 2%/3% ahead of JPMe/cons of INR 1.84/1.82 bn.
Management highlighted improving contribution from fibre and the
managed services business and also economies of scale as drivers of
EBITDA improvement.
• Net profit was INR 827mn (+1% Q/Q), 2%/3% below JPMe/cons of INR
842mn/INR 855mn. The miss is due to higher interest costs (INR 267m vs.
JPMe INR 226m) we believe on account of the new data centre related debt
taken and higher rates. Q3 EPS was INR 5.1 (+1% Q/Q, +10% Y/Y) vs.
JPMe/cons of INR 5.2/5.3.
• FY11 capex is INR 5.3bn which is above the INR 4-5bn. We believe Tulip
has invested in connectivity between two Indian cities (relating to its data
centre business) without which capex would have be within guidance. We
see this as rational investment for future growth. In addition, Tulip spent
INR 2.3bn for the acquisition of the data centre facility.
• TTSL reported total debt of INR 17.8bn vs. INR 14.4bn in Q3 and net debt
of INR 14.3bn vs. INR 12.4bn in Q3. Debt/equity has increased to 1.47x
from 1.25x while debt/EBITDA increased to 2.68x from 2.10x
• Data centre update: Management reiterated their indication that the data
centre once operational will have a revenue potential of INR 10bn. The
timing of start of operations is indicated as August 2011 and the target
booking is 75K sq ft or 17% take-up by year 1.
• Tulip announced its 5th R-APDRP project win in Andhra Pradesh (INR
320m over 5 years), brining the total R-APDRP project value to INR 2.4bn.
• Conference call: Friday, May 13 at 2:30pm IST. Dial in details: India: +91
22 6629 0301; USA 1 866 746 2133; UK 0808 101 1573; HK 800 964 448.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tulip Telecom Limited
Overweight
TULP.BO, TTSL IN
Q4'FY11: Operational performance beat; watching debt
Tulip Telecom has reported a solid Q4FY11 result with revenue growth
sustained at 20% and a higher than expected EBITDA margin expansion.
Higher interest costs drove a slight bottom line miss while the investment in
the data centre increased leverage. Nevertheless management reiterated their
data centre targets and is confident of ~17% bookings by year 1. We continue
to like Tulip and see these results as confirmation of improving trends.
• Q4 revenue of INR 6,380mn, +6% Q/Q, +20% Y/Y: Q4 revenue is inline
with JPMe/consensus of INR 6,380m/INR 6,382m. Management
highlighted that connectivity in the Enterprise Data Services segment drove
growth. Also in terms of revenue, more than 80% of the new orders
received are on fibre – this is a move up from 70% in Q3. We believe that
fibre contributes 50%+ of the order book vs. the 40% reported in Q3. Fibre
penetration within the cities is continuing well according to the company.
• Healthy margin expansion: Consolidated EBITDA margin was 29.3%,
ahead of both JPMe’s 28.8% and consensus estimate of 28.5%. Margin
expanded 80bp Q/Q after the 55bp in Q3 and 90bp in Q2. Absolute EBITDA
of INR 1.87bn is 2%/3% ahead of JPMe/cons of INR 1.84/1.82 bn.
Management highlighted improving contribution from fibre and the
managed services business and also economies of scale as drivers of
EBITDA improvement.
• Net profit was INR 827mn (+1% Q/Q), 2%/3% below JPMe/cons of INR
842mn/INR 855mn. The miss is due to higher interest costs (INR 267m vs.
JPMe INR 226m) we believe on account of the new data centre related debt
taken and higher rates. Q3 EPS was INR 5.1 (+1% Q/Q, +10% Y/Y) vs.
JPMe/cons of INR 5.2/5.3.
• FY11 capex is INR 5.3bn which is above the INR 4-5bn. We believe Tulip
has invested in connectivity between two Indian cities (relating to its data
centre business) without which capex would have be within guidance. We
see this as rational investment for future growth. In addition, Tulip spent
INR 2.3bn for the acquisition of the data centre facility.
• TTSL reported total debt of INR 17.8bn vs. INR 14.4bn in Q3 and net debt
of INR 14.3bn vs. INR 12.4bn in Q3. Debt/equity has increased to 1.47x
from 1.25x while debt/EBITDA increased to 2.68x from 2.10x
• Data centre update: Management reiterated their indication that the data
centre once operational will have a revenue potential of INR 10bn. The
timing of start of operations is indicated as August 2011 and the target
booking is 75K sq ft or 17% take-up by year 1.
• Tulip announced its 5th R-APDRP project win in Andhra Pradesh (INR
320m over 5 years), brining the total R-APDRP project value to INR 2.4bn.
• Conference call: Friday, May 13 at 2:30pm IST. Dial in details: India: +91
22 6629 0301; USA 1 866 746 2133; UK 0808 101 1573; HK 800 964 448.
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