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IDEA CELLULAR LTD.
Good results barring the one-off expense
Idea’s Mar-12 quarter revenue of Rs53.7bn (+6.7% q/q) was in line with the strong
volume growth of 9.1% q/q, offsetting the RPM decline of 2.1% q/q. The EBITDA
margin decline of 140 bps q/q was due to one-off license and WPC charges, which if
normalised could have led to a margin expansion of about 120bps. Clearly, despite
increased aggression from Bharti, Idea has remained disciplined. While operating
performance has remained strong for Idea, our concerns on regulatory risks
(especially the potential impact of new spectrum pricing rules) force us to maintain
a more cautious stance. Maintain 2-EW rating with PT of Rs100, based on DCF.
Mar-12 results summary: Revenue growth came in line although the RPM decline
(-2.1% q/q) was slightly higher than expectations (-0.9% q/q) balanced by strong
volumes (+9.1% q/q, estimate +6.5% q/q). Margins were impacted by a one-off license
and WPC cost, which had a ~260bps negative impact. Despite this, net profit was 6%
ahead of our estimates on the back of forex gains and lower taxes.
Increasing competitive intensity, but the company remains disciplined: The decline
in RPM could be due to increased aggression from Bharti over past three months.
However, Idea’s disciplined approach to margins confirms our hypothesis that this is
unlikely to turn into another tariff war. We believe that operators would remain
disciplined both to repair the stretched balance sheet and to hoard cash for upcoming
spectrum auctions.
Don't ignore the regulatory risks: Idea’s superlative operating performance is a strong
positive in favour of the company. On the other hand, Idea’s smaller balance sheet
makes it more sensitive to any regulatory risk. The looming spectrum payments are the
biggest risk. However, the need to rebid for licenses in seven circles could strain the
cash flows in near term. We maintain our 2-EW stance with PT of Rs100.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDEA CELLULAR LTD.
Good results barring the one-off expense
Idea’s Mar-12 quarter revenue of Rs53.7bn (+6.7% q/q) was in line with the strong
volume growth of 9.1% q/q, offsetting the RPM decline of 2.1% q/q. The EBITDA
margin decline of 140 bps q/q was due to one-off license and WPC charges, which if
normalised could have led to a margin expansion of about 120bps. Clearly, despite
increased aggression from Bharti, Idea has remained disciplined. While operating
performance has remained strong for Idea, our concerns on regulatory risks
(especially the potential impact of new spectrum pricing rules) force us to maintain
a more cautious stance. Maintain 2-EW rating with PT of Rs100, based on DCF.
Mar-12 results summary: Revenue growth came in line although the RPM decline
(-2.1% q/q) was slightly higher than expectations (-0.9% q/q) balanced by strong
volumes (+9.1% q/q, estimate +6.5% q/q). Margins were impacted by a one-off license
and WPC cost, which had a ~260bps negative impact. Despite this, net profit was 6%
ahead of our estimates on the back of forex gains and lower taxes.
Increasing competitive intensity, but the company remains disciplined: The decline
in RPM could be due to increased aggression from Bharti over past three months.
However, Idea’s disciplined approach to margins confirms our hypothesis that this is
unlikely to turn into another tariff war. We believe that operators would remain
disciplined both to repair the stretched balance sheet and to hoard cash for upcoming
spectrum auctions.
Don't ignore the regulatory risks: Idea’s superlative operating performance is a strong
positive in favour of the company. On the other hand, Idea’s smaller balance sheet
makes it more sensitive to any regulatory risk. The looming spectrum payments are the
biggest risk. However, the need to rebid for licenses in seven circles could strain the
cash flows in near term. We maintain our 2-EW stance with PT of Rs100.
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