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Modest revenue development; margin pressure: In a seasonally weak
Q2, we’re looking for ~2%-4% Q/Q revenue growth for Bharti/Idea/RCOM.
This is driven by modest India wireless developments. We also expect slight
margin pressure in Q2 given modest top-line growth but largely fixed costs
though we do expect some help from lower SG&A expenses driven by
lower net adds and rationalized dealer commissions. We forecast flat
margins for all three telcos.
Weak volume momentum; some ARPM help: Subscriber net add
momentum in early Q2 has been weak driving our estimates of only 0.5-
2.7% sequential wireless minute growth. Wireless tariff increases taken by
Bharti, Idea and RCOM in July are expected to have only partially helped in
Q2 and we forecast 0.3%-1.0% Q/Q blended ARPM increases.
Bharti Africa: We forecast 2.8% Q/Q revenue growth to US$1bn, a
slowdown from the 6.0% growth delivered in Q1. This is driven by slower
net add assumptions (due to SIM-registration in several markets) and some
AROM pressure (pricing activity in Nigeria). We’re looking for 80bp Q/Q
margin improvement to 27.5%.
Key issues to watch:.[1] Subscriber reaction to tariff increases and potential
for further increases [2] 3G progress [3] drivers for margin recovery in
H2FY12 [4] foreign exchange exposure management.
Forecast Changes: We reduce our net add estimates across all three
wireless businesses which is the main driver of our forecast changes. Our
FY12E for Bharti on Revenue/EBITDA/EPS is revised by -0.4%/-
2.0%/+1.8%; while for Idea it is -2.6%/-2.5%/-8.6% and for RCOM it is -
2.5%/-3.2%/-17.6%. Our FY12e/FY13e EPS estimates are now INR
18.0/29.0 for Bharti, INR2.9/4.5 for Idea and INR5.0/8.9 for RCOM. Our
TCOM estimates remain unchanged.
Valuations and ratings: Our Mar-12 price target for Bharti is now INR 460
(vs. INR 480 earlier). We maintain our Overweight rating. Our Idea price
target is now INR 87 (vs. INR 90 earlier) and we maintain Neutral rating.
Our RCOM price target is INR 83 (INR 90 earlier) and we remain Neutral.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Modest revenue development; margin pressure: In a seasonally weak
Q2, we’re looking for ~2%-4% Q/Q revenue growth for Bharti/Idea/RCOM.
This is driven by modest India wireless developments. We also expect slight
margin pressure in Q2 given modest top-line growth but largely fixed costs
though we do expect some help from lower SG&A expenses driven by
lower net adds and rationalized dealer commissions. We forecast flat
margins for all three telcos.
Weak volume momentum; some ARPM help: Subscriber net add
momentum in early Q2 has been weak driving our estimates of only 0.5-
2.7% sequential wireless minute growth. Wireless tariff increases taken by
Bharti, Idea and RCOM in July are expected to have only partially helped in
Q2 and we forecast 0.3%-1.0% Q/Q blended ARPM increases.
Bharti Africa: We forecast 2.8% Q/Q revenue growth to US$1bn, a
slowdown from the 6.0% growth delivered in Q1. This is driven by slower
net add assumptions (due to SIM-registration in several markets) and some
AROM pressure (pricing activity in Nigeria). We’re looking for 80bp Q/Q
margin improvement to 27.5%.
Key issues to watch:.[1] Subscriber reaction to tariff increases and potential
for further increases [2] 3G progress [3] drivers for margin recovery in
H2FY12 [4] foreign exchange exposure management.
Forecast Changes: We reduce our net add estimates across all three
wireless businesses which is the main driver of our forecast changes. Our
FY12E for Bharti on Revenue/EBITDA/EPS is revised by -0.4%/-
2.0%/+1.8%; while for Idea it is -2.6%/-2.5%/-8.6% and for RCOM it is -
2.5%/-3.2%/-17.6%. Our FY12e/FY13e EPS estimates are now INR
18.0/29.0 for Bharti, INR2.9/4.5 for Idea and INR5.0/8.9 for RCOM. Our
TCOM estimates remain unchanged.
Valuations and ratings: Our Mar-12 price target for Bharti is now INR 460
(vs. INR 480 earlier). We maintain our Overweight rating. Our Idea price
target is now INR 87 (vs. INR 90 earlier) and we maintain Neutral rating.
Our RCOM price target is INR 83 (INR 90 earlier) and we remain Neutral.
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