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We remain bullish, retain Idea as top pick, raise estimates further
We raise our revenue and earnings estimates for Idea post our analysis of
tariff hikes. We have analysed the company’s revenue market share (RMS)
in detail and note that it has gained RMS in each of its 22 circles in the
last three years. Idea remains our top pick to play the improving outlook
for the Indian telecom sector.
CATALYST
Revenue growth, margin expansion and FCF generation
We expect Idea to report a CAGR of 29% in revenue, 32% in EBITDA, and
42% in EPS, which are among the highest in the telecom sector globally.
Revenue growth is likely to be driven by higher tariffs and data, which are
both margin accretive in our view. We expect capex intensity to decline as
minutes growth moderates and initial 3G capex is taken care of in FY12.
VALUATION
Raise TP, retain BUY; growth deserves premium
We increase our TP for Idea to INR120 from INR110, on the back of our
higher earnings estimates. At our TP, the stock would trade at 7.5x FY13E
EV/EBITDA. While this is a premium to global peers, we believe it is
justified by our strong growth outlook for Idea, as indicated in the exhibit
below. The key risk to our TP is adverse regulatory decisions
Key Earnings Drivers & Sensitivity
For Idea Cellular, we believe the key earnings drivers going
forward will be minutes growth, revenue per minute increase
and growth of 3G data revenue.
We assume the average revenue per minute (ARPM) will
increase from INR0.41 in 1QFY12 to INR0.43 in FY13. The table
shows the sensitivity of EBITDA margin and EPS to changes in
our revenue per minute assumption
The Risk Experts
Our starting point for this page is a recognition of the macro
factors that can have a significant impact on stock-price
performance, sometimes independently of bottom-up factors.
With our Risk Expert page, we identify the key macro risks
that can impact stock performance.
This analysis enhances the fundamental work laid out in the
rest of this report, giving investors yet another resource to
use in their decision-making process
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We remain bullish, retain Idea as top pick, raise estimates further
We raise our revenue and earnings estimates for Idea post our analysis of
tariff hikes. We have analysed the company’s revenue market share (RMS)
in detail and note that it has gained RMS in each of its 22 circles in the
last three years. Idea remains our top pick to play the improving outlook
for the Indian telecom sector.
CATALYST
Revenue growth, margin expansion and FCF generation
We expect Idea to report a CAGR of 29% in revenue, 32% in EBITDA, and
42% in EPS, which are among the highest in the telecom sector globally.
Revenue growth is likely to be driven by higher tariffs and data, which are
both margin accretive in our view. We expect capex intensity to decline as
minutes growth moderates and initial 3G capex is taken care of in FY12.
VALUATION
Raise TP, retain BUY; growth deserves premium
We increase our TP for Idea to INR120 from INR110, on the back of our
higher earnings estimates. At our TP, the stock would trade at 7.5x FY13E
EV/EBITDA. While this is a premium to global peers, we believe it is
justified by our strong growth outlook for Idea, as indicated in the exhibit
below. The key risk to our TP is adverse regulatory decisions
Key Earnings Drivers & Sensitivity
For Idea Cellular, we believe the key earnings drivers going
forward will be minutes growth, revenue per minute increase
and growth of 3G data revenue.
We assume the average revenue per minute (ARPM) will
increase from INR0.41 in 1QFY12 to INR0.43 in FY13. The table
shows the sensitivity of EBITDA margin and EPS to changes in
our revenue per minute assumption
The Risk Experts
Our starting point for this page is a recognition of the macro
factors that can have a significant impact on stock-price
performance, sometimes independently of bottom-up factors.
With our Risk Expert page, we identify the key macro risks
that can impact stock performance.
This analysis enhances the fundamental work laid out in the
rest of this report, giving investors yet another resource to
use in their decision-making process
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