Broking house, Prabhudas Lilladher has maintained outperformer rating on Reliance Communications. It reported a 5% qoq rise in revenue to Rs 39.4bn, while the 80-bp margin expansion resulted in a 7% rise in EBITDA and 10.1% in PAT.
Prabhudas Lilladher report on Reliance Communications:
Reliance Communications reported a 5% qoq rise in revenue to Rs 39.4bn, while the 80-bp margin expansion resulted in a 7% rise in EBITDA and 10.1% in PAT. In the verification process it switched off 5.6m subscribers but this did not hit revenue or profitability, as the de-activated customers had not generated any material revenue in Q3 FY07.
For FY07, revenue rose 35% to Rs 144.6bn, following a 39% jump in the subscriber base to 28m, while the OPM expansion of 1,600bp due to volumes led to a 125% growth in EBITDA and a 443% rise in PAT to Rs 31.6bn.
With accelerated capex plans for its CDMA and GSM networks (the present circles) and wider geographical coverage, the company is confident of reviving the growth rate in net additions. It is striving to maintain a 21-22% market share of incremental net additions in the next 12 months.
At the CMP, the stock trades at 23.5x FY08E earnings, which are expected to grow at 38% yoy on the back of a 75% yoy growth in the (truncated) subscriber base. We believe that the superior growth rates in the broader markets would be maintained, and rate the stock an Outperformer.
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