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Angel Broking neutral on Reliance Communications

Angel Broking has maintained neutral rating on Reliance Communications, in its January 24, 2013 research report.

January 28, 2013 / 04:01 PM IST
 
 
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Angel Broking has maintained neutral rating on Reliance Communications, in its January 24, 2013 research report.
 
“For 3QFY2013, Reliance Communications (RCom) reported an in-line revenue performance but the consolidated profit fell short of expectations because of higher depreciation and interest costs. One key positive thing was that the average revenue per user (ARPU) grew by 16.7% to Rs119 on the back of subscriber reduction and September’s tariff hike. Due to lack of triggers except for the planned monetization of its Infratel business, which can cut down its debt by more than half, we remain Neutral on the stock.”
 
“RCom reported a revenue of Rs5,301cr, up 1.9% qoq. The wireless revenue came in at Rs4,515cr, up 2.1% qoq, on the back of 14.8% qoq growth in minutes of usage (MOU) to 271 and 16.7% qoq growth in ARPU. The overall network traffic grew by 0.5% qoq to 103bn min. RCom’s overall EBITDA margin declined by 31bp qoq to 31.2%, due to ~7% qoq higher access charges. The PAT for the quarter came in at Rs106cr, negatively impacted by higher depreciation and interest costs.”
 
“RCom's 3G/data business subscriber base during the quarter stood at 6.1mn/27.6mn as against 4.8mn/26mn in 2QFY2013. The company’s Management reiterated its stand that data growth and tariff hike will be primary drivers for future growth. The company revised its base rates from Rs1.25 to Rs1.50 in September 2012 and indicated that it has reduced its promotional discounts from January 2013 which is in tandem with its peer companies. Both these steps will lead to ARPM improvement in the coming quarters. Going forward, we expect RCom to post a revenue CAGR of 4% over FY2012-14E. The company is striving to reduce the debt level in its books and has maintained its stance of selling stake in its tower assets, which might help in deleveraging the balance sheet and reducing debt. This would act as a positive trigger for the stock price. Various other announcements related to measures of reducing debt have been made time and again in the past but no concrete step has been visible until now. We maintain our Neutral view on the stock,” says Angel Broking research report.


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To read the full report click on the attachment

first published: Jan 28, 2013 04:01 pm

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