Buy Idea Cellular; target of Rs 140: AnandRathi

AnandRathi is bullish on Idea Cellular and has recommendation buy rating on the stock with a target of Rs 140 in its April 26, 2013 research report.
 
"Idea Cellular’s (Idea) revenues were up 13 percent yoy and came in 2.5 percent/4.2 percent above our/consensus estimates, with traffic growth fuelling the surprise. EBITDA (adjusted for a one-off regulatory charge) was up 29 percent and was 11 percent/13 percent above our/consensus estimate, aided by flat network costs. Adjusted PAT was Rs3.4bn, materially higher than our and consensus estimate of Rs2.7bn. ARPM, at 41.2p, was practically flat vs our expectation of a marginal 0.5 percent improvement. Voice ARPM was down 0.7 percent, which is disappointing considering one would have expected that a drop in competitive intensity and incumbents’ focus on curtailing discounts/ promotions would result in improved realizations."
 
"Post-paid subscribers grew 20 percent yoy vs 8 percent overall subscriber growth. Pre-paid churn wound down to 4.4 percent vs 7 percent/10.4 percent in 3Q/2Q. Data volume was up 14 percent qoq, while data realizations improved (9.3 percent qoq), the first time in the preceding three quarters. We raise our target from Rs130 (7x FY15e EV/EBITDA; regulatory impact Rs25) to Rs140 (7.4x, Rs25) owing to increasing growth assurance (earnings up 44 percent in FY13). We retain a Buy due to the improving competitive scenario in the Indian wireless market and Idea’s operational outperformance," says AnandRathi research report.

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