Buy Idea Cellular; target of Rs 125: Motilal Oswal

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Buy Idea Cellular; target of Rs 125: Motilal Oswal

Motilal Oswal is bullish on Idea Cellular and has recommended buy rating on the stock with a target of Rs 125 in its January 24, 2012 research report.

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Motilal Oswal is bullish on Idea Cellular and has recommended buy rating on the stock with a target of Rs 125 in its January 24, 2012 research report.

"Idea Cellular, an Aditya Birla Group company, is India's third largest wireless operator with a revenue market share of 14%. Idea operates in all the 22 telecom circles of which 13 are classified as established service areas and nine new service areas."

"Idea's strong execution in established as well as new circles will drive subscriber CAGR of 17% over FY11- 14E. We expect consolidated EBITDA CAGR of 29% over FY11-14E driven by increased contribution of 3G revenue, RPM increase, and operating leverage. Strong incumbency advantage in 8 established circles and spectrum allocation in the 900MHz band in 9 circles. Key beneficiary of tower sharing initiatives including formation of Indus Towers - a three way passive infrastructure JV between Bharti, Idea, and Vodafone. The company has won 3G Spectrum in 11 circles. We expect incremental 3G revenue to contribute ~3% of wireless revenues by FY14E."

"While we upgrade our FY12 revenue/EBITDA/PAT estimates by 1/3/28%, our FY13 estimates are largely unchanged. We expect 29% EBITDA CAGR over FY11-14E. The stock trades at an EV/EBITDA of 8.1x FY12E and 6x FY13E. Reiterate Buy with a price target of INR125/sh based on 8x FY13 EV/EBITDA ex-Indus (~6x FY14 EV/EBITDA) and INR5m/tower for 12.8% effective stake in Indus towers. While regulatory environment remains uncertain, our target price already incorporates INR46b (INR14/sh) potential outflow for regulatory risks (~50% of outlay based on TRAI recommendation)," says Motilal Oswal research report. 

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To read the full report click on the attachment