Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular (IDEA.BO): Despite higher re-bidding price, Idea offers
18% upside; reiterate Buy
We reiterate our Buy rating on Idea even after potential license
cancellation notice for nine circles as we expect the easing competitive
environment in its incumbent circles to more than offset an increase in
re-bidding costs in its new circles.
Source of opportunity
Solid execution to continue. We expect Idea to continue to gain
revenue market share as new operators face difficulties with
incremental funding, thereby rendering more bargaining power to
incumbents and providing further room to incumbents for further
tariff hikes. We note that Idea has shown a gradual increase in
revenue market share from 12.7% in 3QFY10 to 14.0% in Sep 2011,
led by solid execution and improving scale, in our view.
Expect strong growth to continue resulting in scale
benefits/margin improvements. We expect Idea to show strong
revenue/EBITDA/EPS CAGR of 21%/27%/36% for FY11E-FY14E led by
healthy subs additions and stable tariffs. We expect Idea to show a
390bps improvement in EBITDA margins led by scale benefits.
Valuations not expensive in the context of its growth: Idea
trades at FY13E EV/EBITDA of 6.2X (Asian telcos avg of 6.7X) and
offers FY12-14E EPS CAGR of 75% (Asian telcos average of 8%).
Catalysts
1) Continued increase in revenue market share and strong subs
additions; 2) Further improvement in ARPU/RPM; 3) Lower than TRAI
recommended excess spectrum pricing.
Valuation
We revise our 12-month SOTP-based target price to Rs111 from Rs107 as
we raise our FY13E-FY14E EPS by 9%/9% to factor in easing competitive
environment in Idea’s incumbent circles. We also factor in a one-off
impact of Rs6/share (in line with winning 3G auction price) related to rebidding
for licenses. Idea currently trades at 6.2X FY13E EV/EBITDA (vs.
Asian telcos average of 6.7X), and offers 28% yoy EBITDA CAGR in
FY13E (vs. 7% for Asian telcos).
Key risks
1) Higher-than-expected bidding costs in auction; 2) Higher-thanexpected
regulatory costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Idea Cellular (IDEA.BO): Despite higher re-bidding price, Idea offers
18% upside; reiterate Buy
We reiterate our Buy rating on Idea even after potential license
cancellation notice for nine circles as we expect the easing competitive
environment in its incumbent circles to more than offset an increase in
re-bidding costs in its new circles.
Source of opportunity
Solid execution to continue. We expect Idea to continue to gain
revenue market share as new operators face difficulties with
incremental funding, thereby rendering more bargaining power to
incumbents and providing further room to incumbents for further
tariff hikes. We note that Idea has shown a gradual increase in
revenue market share from 12.7% in 3QFY10 to 14.0% in Sep 2011,
led by solid execution and improving scale, in our view.
Expect strong growth to continue resulting in scale
benefits/margin improvements. We expect Idea to show strong
revenue/EBITDA/EPS CAGR of 21%/27%/36% for FY11E-FY14E led by
healthy subs additions and stable tariffs. We expect Idea to show a
390bps improvement in EBITDA margins led by scale benefits.
Valuations not expensive in the context of its growth: Idea
trades at FY13E EV/EBITDA of 6.2X (Asian telcos avg of 6.7X) and
offers FY12-14E EPS CAGR of 75% (Asian telcos average of 8%).
Catalysts
1) Continued increase in revenue market share and strong subs
additions; 2) Further improvement in ARPU/RPM; 3) Lower than TRAI
recommended excess spectrum pricing.
Valuation
We revise our 12-month SOTP-based target price to Rs111 from Rs107 as
we raise our FY13E-FY14E EPS by 9%/9% to factor in easing competitive
environment in Idea’s incumbent circles. We also factor in a one-off
impact of Rs6/share (in line with winning 3G auction price) related to rebidding
for licenses. Idea currently trades at 6.2X FY13E EV/EBITDA (vs.
Asian telcos average of 6.7X), and offers 28% yoy EBITDA CAGR in
FY13E (vs. 7% for Asian telcos).
Key risks
1) Higher-than-expected bidding costs in auction; 2) Higher-thanexpected
regulatory costs.
No comments:
Post a Comment