Motilal Oswal is bullish on Idea Cellular has recommended buy rating on the stock with a target price of Rs 85 in its research report dated April 30, 2018.
Motilal Oswal's research report on Idea Cellular
Consol. revenue declined 6% QoQ to INR61.4b (2% miss), led by ARPU downtrading (-8% QoQ to INR105). However, consol. EBITDA rose 18% QoQ to INR14.5b (39% beat), driven by a decline in opex cost (incl. INR4.4b provision reversal one-offs). Excluding one-offs, EBITDA stood at INR10.1b (-18% QoQ). Net loss narrowed to INR9.6b (est. of INR15.8b), led by better-than-expected EBITDA. For FY18, revenue declined 21% YoY to INR282.8b (1% miss), while EBITDA fell 41% to INR60.5b (6% beat). Net loss widened to INR41.7b in FY18 (INR4b in FY17).
We believe headwinds from APRU downtrading would continue for the next few quarters. However, merger synergies should aid in fighting competition. The stock is trading at EV/EBITDA of 13.7x/8.5x on combined entity EBITDA of FY19/20E. With a cut in our estimates, we reduce TP to INR85 (INR91 earlier), assigning 9x to FY20E combined EBITDA of INR188b (including merger synergies). Maintain Buy.
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