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Voice sees modest growth… TCOM’s Wholesale Voice segment saw
rather modest revenue growth of 1% Y/Y in Q1, despite 15%+ growth in
volumes. With this segment contributing ~50% to consolidated revenue,
we remain concerned about the continued pricing pressure and modest
performance here.
…while Data contribution slower than expected: While revenue in
the data segment grew 9% Y/Y, we believe its contribution to the Core
(voice+ data) revenue increased less than 2pp over the year and
furthermore data’s contribution in standalone revenue declined 3pp Y/Y.
While profitability is a focus for management via increasing contribution
from data, we believe the progress is slower than required.
Neotel still a drag. TCOM now consolidates 100% of Neotel in its
results (61.5% effective stake) vs. 43.2% earlier. This implies increased
top-line but also a larger drag on consolidated margins. Neotel remains
behind schedule and we are less optimistic than management on its
market share target of a 3x increase to 15% in three years from 5%
currently.
Forecast changes: We raise our FY12/FY13 revenue forecasts by
6%/6% as we incorporate 100% of Neotel in our estimates. We reduce
our margin estimates by 0.9pp/1.0pp to account for Neotel and also a
slower increase in data contribution than expected earlier. Our EPS
estimates are now –INR19.3/-INR15.8.
Our Mar-12 price target is INR175 (vs. INR180 earlier), offering
13% downside potential. Pricing pressure in global voice and India data
segments, Neotel being behind schedule and a stretched balance sheet
remain concerns. We maintain our Underweight rating. Risks to our
view: margin expansion driven by data growth, TTLS stake sake,
monetization of surplus land sale, and a quicker-than-expected
turnaround at Neotel.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Voice sees modest growth… TCOM’s Wholesale Voice segment saw
rather modest revenue growth of 1% Y/Y in Q1, despite 15%+ growth in
volumes. With this segment contributing ~50% to consolidated revenue,
we remain concerned about the continued pricing pressure and modest
performance here.
…while Data contribution slower than expected: While revenue in
the data segment grew 9% Y/Y, we believe its contribution to the Core
(voice+ data) revenue increased less than 2pp over the year and
furthermore data’s contribution in standalone revenue declined 3pp Y/Y.
While profitability is a focus for management via increasing contribution
from data, we believe the progress is slower than required.
Neotel still a drag. TCOM now consolidates 100% of Neotel in its
results (61.5% effective stake) vs. 43.2% earlier. This implies increased
top-line but also a larger drag on consolidated margins. Neotel remains
behind schedule and we are less optimistic than management on its
market share target of a 3x increase to 15% in three years from 5%
currently.
Forecast changes: We raise our FY12/FY13 revenue forecasts by
6%/6% as we incorporate 100% of Neotel in our estimates. We reduce
our margin estimates by 0.9pp/1.0pp to account for Neotel and also a
slower increase in data contribution than expected earlier. Our EPS
estimates are now –INR19.3/-INR15.8.
Our Mar-12 price target is INR175 (vs. INR180 earlier), offering
13% downside potential. Pricing pressure in global voice and India data
segments, Neotel being behind schedule and a stretched balance sheet
remain concerns. We maintain our Underweight rating. Risks to our
view: margin expansion driven by data growth, TTLS stake sake,
monetization of surplus land sale, and a quicker-than-expected
turnaround at Neotel.
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