Sell Reliance Comm; target of Rs 84: ICICIdirect.com

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Sell Reliance Comm; target of Rs 84: ICICIdirect.com

ICICIdirect.com is bearish on Reliance Communications and has recommended sell rating on the stock with a target of Rs 84 in its February 13, 2012 research report.

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ICICIdirect.com is bearish on Reliance Communications and has recommended sell rating on the stock with a target of Rs 84 in its February 13, 2012 research report.

"Reliance Communication reported its Q3FY12 numbers, which were below our expectations on the topline front. Revenues for the quarter stood at Rs 4824.1 crore against our expectation of Rs 5066.1 crore primarily on account of lower than expected growth in traffic, growing 0.7% QoQ. The EBITDA for the quarter stood at Rs 1383.1 crore against our expectation of Rs 1483.5 crore, growing 1.9% QoQ. The EBITDA margin for the quarter stood at 28.7% expanding by 35 bps QoQ. However, on the bottomline front, the company reported better than expected numbers. Net profit for the quarter stood at Rs 186.2 crore against our expectation of Rs 165.3 crore primarily due to higher other income, which stood at Rs 228 crore against our expectation of Rs 100 crore."

"The traffic on the network grew marginally by 1.0% QoQ to 99.9 billion minutes while the ARPM remained stable at 45 paisa. ARPU and MoU, however, continued with their declining trend, falling from Rs 101 and 227 minutes to Rs100 and 224 minutes, respectively. Subscriber net adds continued to decline with the company adding 3.0 million wireless subscribers in this quarter. Data revenues contributed to over 20% of the total revenues."

"The quarter was marked by subdued growth in traffic suggesting price elasticity among subscribers. In the wake of higher interest cost in the future as guided by the management, we have revised our estimates for FY13 from Rs 4.0 to Rs 3.8. At the CMP of Rs 94, the stock is trading at 26.5x FY12E EPS of Rs 3.5 and 24.9x FY13E EPS of Rs 3.8. We have valued the stock using the DCF methodology and arrived at a target price of Rs 84, assuming 4.7% CAGR in revenue over FY11E-FY20E and terminal growth rate of 3%. Due to the recent rally in the stock, we rate it as SELL," says ICICIdirect.com research report.  

Public holding more than 90% in Indian cos

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