Goldman Sachs:: SELL Mahanagar Telephone Nigam (MTNL) Below expectations due to higher staff costs, interest expenses

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


EARNINGS REVIEW
Mahanagar Telephone Nigam (MTNL.BO)
Sell  Equity Research
Below expectations due to higher staff costs, interest expenses; Sell
What surprised us
We maintain Sell on MTNL after the company reported in-line 1QFY12
revenues but higher than estimated EBITDA loss of Rs3.6 bn vs.
our/Bloomberg consensus estimate of Rs3 bn/Rs2.6bn. Even net loss of
Rs8.5 bn was higher than our/consensus estimates of Rs7.7 bn/Rs8.2 bn
mainly due to EBITDA miss and higher net interest expenses. Results
highlights: 1) Total revenues increased 0.7% qoq led by 1.6% increase in
revenues from basic services, partially offset by a 2.6% qoq decline in
cellular revenues (due to 3.5% qoq decline in implied ARPU). 2) Although
EBITDA loss decreased sequentially to Rs3.6 bn (from Rs5.3 bn in 4Q), it
was higher than our estimate of Rs3 bn mainly due to higher than
estimated staff costs at Rs8.5 bn vs. our estimate of Rs7.4 bn (and Rs9.3 bn
in 4Q). Admin expenses declined 30.6% qoq and were -14.1% vs. our
estimates while network charges and revenue share decreased 7.4% qoq
and were -8.2% vs. our estimates. 3)  Net interest expenses increased
28.9% qoq and were 43.2% higher than our estimates leading to a higher
than expected net loss.
What to do with the stock
Although we keep our revenue estimates largely unchanged after the
company reported in-line revenues, we increase our FY12E/FY13E/FY14E
loss per share estimates by 5.3%/7.8%/11.1% to Rs46.51/Rs44.17/Rs40.96
on the back of higher staff cost than our estimates. Accordingly, we lower
our 12-month SOTP-based target price by 1% to Rs38 (ADR: US$1.56) as
we also roll forward our valuation timeframe by one quarter. Risks: Lower
than expected staff costs.