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Idea Cellular Limited
Neutral
IDEA.BO, IDEA IN
Q1'FY12 wrap: Strong margins and tariff increase confirmed
Key highlights from Q1FY12 results were the solid margin improvement and
management’s confirmation of a tariff increase in 6 circles or 60% of its base.
We have increased our earnings estimates to account for the Q1 beat and
management commentary. However, we remain concerned about outstanding
litigations and the slow progress of new circles. We would be looking for a
favorable resolution of regulatory issues or a better entry point to turn more
positive on Idea. Our Mar-12 PT is now Rs90 (up from Rs80 earlier).
Tariff increases confirmed: Idea confirmed a 20% price hike in 6 circles
which we believe account for ~60% of Idea's sub and revenue base. This is
in line with our expectations of Idea following suit after Bharti and
Vodafone raised rates. Revenue share loss of MOU declines would lead
management to reconsider the rate hike.
ARPM improvement a positive surprise: Even prior to the rate hike, Idea
has delivered a slight 0.4paisa/1% ARPM improvement to 41.0paisa. This is
ahead of our estimate of a 1% decline and as a result our forward estimates
are increased. Our FY12/13 revenue estimates are now 2.2%/0.5% higher.
Solid margin improvement: Idea’s consolidated margin improved 2.7pp
Q/Q to 26.6% helped by both revenue growth and lower SG&A expenses.
We have adjusted our estimates as a result and increased our FY12/FY13
margin estimates by 2.0/1.1pp. Our EPS estimates are now at INR 3.2/5.9
vs. INR 2.8/4.7 earlier. We expect consensus to increase estimates too.
Our new Mar-12 price target is increased to Rs90 (from Rs80earlier).
Our PT is based on a SOTP of Idea’s core business, Indus Towers and Rs13
downward regulation-related adjustment. Idea trades at an FY13E P/E of
15.9x and 6.3x EV/EBITDA, a 15% premium and in line with Bharti,
respectively. Key upside risks include monetization of tower assets, M&A,
and better-than-expected pricing while downside risks include an
unfavorable regulatory outcome, new circles drag
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular Limited
Neutral
IDEA.BO, IDEA IN
Q1'FY12 wrap: Strong margins and tariff increase confirmed
Key highlights from Q1FY12 results were the solid margin improvement and
management’s confirmation of a tariff increase in 6 circles or 60% of its base.
We have increased our earnings estimates to account for the Q1 beat and
management commentary. However, we remain concerned about outstanding
litigations and the slow progress of new circles. We would be looking for a
favorable resolution of regulatory issues or a better entry point to turn more
positive on Idea. Our Mar-12 PT is now Rs90 (up from Rs80 earlier).
Tariff increases confirmed: Idea confirmed a 20% price hike in 6 circles
which we believe account for ~60% of Idea's sub and revenue base. This is
in line with our expectations of Idea following suit after Bharti and
Vodafone raised rates. Revenue share loss of MOU declines would lead
management to reconsider the rate hike.
ARPM improvement a positive surprise: Even prior to the rate hike, Idea
has delivered a slight 0.4paisa/1% ARPM improvement to 41.0paisa. This is
ahead of our estimate of a 1% decline and as a result our forward estimates
are increased. Our FY12/13 revenue estimates are now 2.2%/0.5% higher.
Solid margin improvement: Idea’s consolidated margin improved 2.7pp
Q/Q to 26.6% helped by both revenue growth and lower SG&A expenses.
We have adjusted our estimates as a result and increased our FY12/FY13
margin estimates by 2.0/1.1pp. Our EPS estimates are now at INR 3.2/5.9
vs. INR 2.8/4.7 earlier. We expect consensus to increase estimates too.
Our new Mar-12 price target is increased to Rs90 (from Rs80earlier).
Our PT is based on a SOTP of Idea’s core business, Indus Towers and Rs13
downward regulation-related adjustment. Idea trades at an FY13E P/E of
15.9x and 6.3x EV/EBITDA, a 15% premium and in line with Bharti,
respectively. Key upside risks include monetization of tower assets, M&A,
and better-than-expected pricing while downside risks include an
unfavorable regulatory outcome, new circles drag
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