Kotak rates Idea Cellular 'Reduce' with target of Rs 55

Kotak Institutional Equities has assigned a 'Reduce' rating to Idea Cellular citing expensive valuations. Idea, on Monday, released its Q4 results, reporting robust growth in Q4. Consolidated revenues, EBITDA and PAT grew 7%, 13.4% and 13% for the company on a quarter-on-quarter basis. However, rich valuation of the stock, which is a premium to Bharti, despite higher regulatory risks leaves little upside potential, a report by Kotak says, explaining the ratings cut. The stock which currently trades at Rs 72 commands a price-to-earnings of 58 times 2012 estimated earnings. Kotak has downgraded the stock and given a price target of Rs 55.

While revenues for Idea Cellular came in line with expectations, Ebitda margins were reported higher this quarter by 140 bps. This was purely on the basis of one-off cost reversals and higher other income, says the report. Kotak is waiting for Idea