Idea Cellular: RPM decline exerts pressure on revenue, retain sell
Highlights:
- RPM decline exerts pressure on revenue; adjusted margin down 198bps q-o-q: Idea’s 1QFY13 top-line witnessed a subdued 2.5% q-o-q growth (Rs55bn, exactly in line with estimates but slightly below consensus). While MoU growth was healthy at 5.3% q-o-q, RPM declined 2.4% q-o-q to 41.2 paise owing to heightened competition, Subdued revenue growth had a greater impact on margins than what was had expected, as adjusted for the one-off item of Rs1.5bn related to licence fees in 4QFY12, EBITDA margin fell 198bps q-o-q, well below estimates. This was a key disappointment in 1QFY13.
- Lower margins, higher depreciation and forex loss trim net profit: Owing to lower margins, higher depreciation owing to revision in useful life of fixed assets (Rs480mn impact) and forex loss of Rs245mn (Rs135mn gain in 4QFY12), Idea’s net profit declined 2% q-o-q, over 20% below estimates. Adjusted for the depreciation impact and tax, net profit would have been higher by 11.7% q-o-q, but it is below the estimate by 11.3% and below consensus estimate by 10.6%.
- Hyper-competition, regulatory risk persist, debt levels stay high; we retain Sell: Hyper-competition persists, RPM remains under pressure, debt stays high and regulatory risks remain a reality, with the prospects of cash outflows in the form of spectrum charges, leading to possibility of raising more debt. At the CMP, the stock trades at 5.6x EV/EBITDA on FY13E EBITDA. Nirmal Bang retains their Sell rating with a revised target price of Rs76 (Rs81) as they have cut FY13E/FY14E EBITDA by 6% each.
- RPM decline exerts pressure on revenue; adjusted margin down 198bps q-o-q: Idea’s 1QFY13 top-line witnessed a subdued 2.5% q-o-q growth (Rs55bn, exactly in line with estimates but slightly below consensus). While MoU growth was healthy at 5.3% q-o-q, RPM declined 2.4% q-o-q to 41.2 paise owing to heightened competition, Subdued revenue growth had a greater impact on margins than what was had expected, as adjusted for the one-off item of Rs1.5bn related to licence fees in 4QFY12, EBITDA margin fell 198bps q-o-q, well below estimates. This was a key disappointment in 1QFY13.
- Lower margins, higher depreciation and forex loss trim net profit: Owing to lower margins, higher depreciation owing to revision in useful life of fixed assets (Rs480mn impact) and forex loss of Rs245mn (Rs135mn gain in 4QFY12), Idea’s net profit declined 2% q-o-q, over 20% below estimates. Adjusted for the depreciation impact and tax, net profit would have been higher by 11.7% q-o-q, but it is below the estimate by 11.3% and below consensus estimate by 10.6%.
- Hyper-competition, regulatory risk persist, debt levels stay high; we retain Sell: Hyper-competition persists, RPM remains under pressure, debt stays high and regulatory risks remain a reality, with the prospects of cash outflows in the form of spectrum charges, leading to possibility of raising more debt. At the CMP, the stock trades at 5.6x EV/EBITDA on FY13E EBITDA. Nirmal Bang retains their Sell rating with a revised target price of Rs76 (Rs81) as they have cut FY13E/FY14E EBITDA by 6% each.
Click here to read the full report
|
BSE
129.65 -0.65 (-0.50%) NSE
129.60 -0.65 (-0.50%) |
Read More
|
World News
Other Articles
- Idea Cellular Q4FY13: Revenue up 8.7% QoQ and 12.9% YoY
- Idea Cellular: Active subscriber market share of 16.5%
- Idea reports strong gross revenue of Rs60.95 bn during Q4FY13
- Idea Cellular: Net profit to grow 16% q-o-q to Rs2.66b in Q4
- Idea Cellular: Wireless traffic momentum to sustain
Featured Author
 |
Motilal Oswal |
- Macroeconomic indicators & Stock markets
- Midcap/Smallcap Indices - Time to catch up and stop under performing?
- MF Scheme Analysis: Franklin India Bluechip Fund (G)
- Note on RBI's Monetary Policy Announcement for 2013-14
- South Indian Bank Q3FY13: Results in line with expectations, retain accumulate More
Also On Valuenotes.Com
Personal Finance
The Art and Science of Buying Life InsuranceInvest early in your careerKnow your PAN card betterStock Recommendation
Thermax Q4FY13: Good all round performanceSBI Q4FY13: Operational challenges now come to the foreZEE reported the best-ever quarter in terms of subscriptionMarket Outlook
Week ahead: Nifty surging higher, the bulls remain in controlDow Theory: A tool for technical analystsEquity markets witnessed a choppy session of trade
Reader's Comments
Discussion
24th May 2013 | 06:31 am
Stock Tips : Intraday Stock Futures Tips : 24 May 2013
24th May 2013 | 04:56 am
Stock Tips : Intraday Stock Futures Tips : 24 May 2013