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2QFY12 EBITDA came in 8% higher than our estimate. Cost pressures in 2Q were absorbed by
higher-than-expected revenue growth of 2% qoq. The 4.1% qoq increase in RPM was a positive
surprise. We expect EBITDA growth to rebound in 2HFY12 led by higher RPM, minute growth
and a decline in churn. Maintain Buy.
Results beat our estimates – EBITDA 8% ahead of our estimate
Idea’s 2Q results came in ahead of our expectations. Revenue grew 2.0% qoq to Rs46.1bn, 1.6%
higher than our estimate of Rs45.4bn. EBITDA declined to only 2.1% qoq to Rs11.7bn, 8% higher
than our estimate. The EBITDA decline was restricted despite multiple cost pressure in 2Q: a hike
of 15% qoq in personnel costs, 3G roaming costs (-88bp impact) and higher network costs (-9bp
impact). PAT (adjusted for forex loss of Rs313m) stood at Rs1.3bn (a 29% qoq decline).
However, PAT was 29% higher than our estimate.
RPM rose due to 3G roaming revenue and reduction in promotional minutes, in our view
Revenue per minute (RPM) rose by 4.1% qoq to 42.7p/min in 2QFY12 (vs 41p/min in 1Q). We
believe the bulk of the increase in non-voice revenue by 11.5% qoq to Rs6bn was due to 3G
roaming revenue, contributing to an increase in RPM of 0.6p/min. In addition, RPM rose due to a
2.8% qoq increase in voice RPM to 37.1p/min (from 36p/min in 1Q). We believe the increase in
voice RPM was due primarily to the reduction in promotional minutes from the system, rather than
the impact of tariff hikes taken by the company in 2Q, and we expect voice RPM to increase
further in 2HFY12.
Minutes declined sequentially, but we expect a rebound in 2HFY12
Minutes declined by 2.2% qoq to 106.2bn (vs our estimate of 110.8bn). 2Q is a seasonally weak
quarter for minutes growth. However, in our view, the decline was driven also by the reduction in
promotional minutes from the system that led to an increase in RPM. Management indicated
during the conference call that minute growth had rebounded in October. We expect robust
minute growth in 2HFY12 led by the festive season. We expect EBITDA growth to rebound in
2HFY12 led by higher RPM, minute growth and a decline in churn. We maintain our earnings
forecasts and target price. We reiterate our Buy rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
2QFY12 EBITDA came in 8% higher than our estimate. Cost pressures in 2Q were absorbed by
higher-than-expected revenue growth of 2% qoq. The 4.1% qoq increase in RPM was a positive
surprise. We expect EBITDA growth to rebound in 2HFY12 led by higher RPM, minute growth
and a decline in churn. Maintain Buy.
Results beat our estimates – EBITDA 8% ahead of our estimate
Idea’s 2Q results came in ahead of our expectations. Revenue grew 2.0% qoq to Rs46.1bn, 1.6%
higher than our estimate of Rs45.4bn. EBITDA declined to only 2.1% qoq to Rs11.7bn, 8% higher
than our estimate. The EBITDA decline was restricted despite multiple cost pressure in 2Q: a hike
of 15% qoq in personnel costs, 3G roaming costs (-88bp impact) and higher network costs (-9bp
impact). PAT (adjusted for forex loss of Rs313m) stood at Rs1.3bn (a 29% qoq decline).
However, PAT was 29% higher than our estimate.
RPM rose due to 3G roaming revenue and reduction in promotional minutes, in our view
Revenue per minute (RPM) rose by 4.1% qoq to 42.7p/min in 2QFY12 (vs 41p/min in 1Q). We
believe the bulk of the increase in non-voice revenue by 11.5% qoq to Rs6bn was due to 3G
roaming revenue, contributing to an increase in RPM of 0.6p/min. In addition, RPM rose due to a
2.8% qoq increase in voice RPM to 37.1p/min (from 36p/min in 1Q). We believe the increase in
voice RPM was due primarily to the reduction in promotional minutes from the system, rather than
the impact of tariff hikes taken by the company in 2Q, and we expect voice RPM to increase
further in 2HFY12.
Minutes declined sequentially, but we expect a rebound in 2HFY12
Minutes declined by 2.2% qoq to 106.2bn (vs our estimate of 110.8bn). 2Q is a seasonally weak
quarter for minutes growth. However, in our view, the decline was driven also by the reduction in
promotional minutes from the system that led to an increase in RPM. Management indicated
during the conference call that minute growth had rebounded in October. We expect robust
minute growth in 2HFY12 led by the festive season. We expect EBITDA growth to rebound in
2HFY12 led by higher RPM, minute growth and a decline in churn. We maintain our earnings
forecasts and target price. We reiterate our Buy rating.
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