Buy Idea Cellular; target of Rs 140: Motilal Oswal

Motilal Oswal is bullish on Idea Cellular and has recommended buy rating on the stock with a target of Rs 140 in its January 30, 2013 research report.
 
“Idea Cellular's 3QFY13 EBITDA increased 9.6% YoY and 3.6% QoQ to INR14.7b (v/s est of INR14.8b). PAT increased 14% YoY but declined 4.7% QoQ to INR2.29b (v/s est of INR2.62b) due to higher depreciation and INR133m forex loss (v/s INR180m forex gain in 2QFY13). Consolidated revenues grew 11% YoY and 5% QoQ to INR55.8b (est INR54.8b) led by ~5% QoQ traffic growth but offset by 0.5% RPM decline (flat for two consecutive quarters v/s declines earlier). EBITDA margin stood at 26.4%, down 30-35bp YoY/QoQ led by QoQ increase in access costs (up 40bp), network costs (up 20bp) and SGA (up 40bp), but offset by lower staff and other costs. While blended RPM (41.1p) was impacted due to implementation of new VAS regulations (non-voice revenues were down 100bp QoQ to 14.6%), voice RPM increased 0.7% QoQ. Consolidated net debt increased ~10% QoQ to INR131b due to payment for 2G spectrum in seven circles (re-bid and won in Nov-12; net payment of INR13b after adjusting 2008 outlay). Capex guidance for FY13 has been reduced from INR35b to INR30b.”

“While margin performance was below estimate, we believe 3QFY13 results indicate encouraging trends on RPM, traffic growth and subscriber churn. Most operators, including Idea, have been rationalizing pre-paid tariffs as RPM improvement remains a key focus area across the industry. We believe margin outlook is positive as pricing improvement is likely to more than offset input cost inflation and have limited impact of traffic growth. Our earnings estimates are largely unchanged. We expect 18% EBITDA CAGR over FY13E-15E. The stock trades at EV/EBITDA of 6.8x FY14E and 5.7x FY15E. Maintain Buy with a target price of INR140,” says Motilal Oswal research report.

Public holding more than 90% in Indian cos

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