Gautam Sinha Roy of Motilal Oswal Securities told CNBC-TV18, "We have liked telecom as a space for quite a few months now. It is not a new addition in that sense. It is just a continuation of our preference for that sector."
He further added, "As of now a target price should be closer to Rs 160 for Idea Cellular based on fundamental valuation, but the competitive intensity in the sector is declining meaningfully and the pricing power, which was at its bottom somewhere last year, is improving; so as the number of voice minutes available to the incumbents, combined with this increased penetration of data. These three factors together will drive huge operating leverage for the sector, which should improve profitability very strongly."
"The profit number is hugely leveraged to all these factors including revenue per minute (RPM) and voice traffic given their costs are more or less fixed. This is one sector where there could be a secular earnings growth across the board over the next few years. So from that perspective we do like the sector and we believe that even at these valuations there is potential upside based on upward revisions in earnings going forward. So that is one theme that we continue to play."
"In a nutshell, it is one of our preferred plays among the few sectors that we have continued to like for the last quite a few months. So overall strategy or sector preferences does not really change," Roy said. Also Read: Bharti, Idea may follow Vodafone with 2G data tariff cut
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