Buy Idea Cellular; target of Rs 130: ICICIDirect

ICICIDirect's research report on Idea CellularIdea reported a 1.2% QoQ increase in total minutes on the network to 201.6 billion minutes, owing to lower-than-expected subscriber growth & MOU. Voice revenues came in at | 6674.0 crore, up 5.8% QoQ where the beat was mainly due to voice tariff rise to 33.3 paisa (up 4.4% QoQ) vs. an expectation of 31.5 paisa. Data revenues exhibited 4.4% QoQ growth to | 1871 crore, forming 20.1% of mobility revenues led by increase in data tariffs to 22.9 paisa, up 2.7% QoQ. This was surprising in times of heightened competition. Data volume growth, however, remained subdued at 1.5% QoQ to 82 billion MB EBITDA came in at | 3616.0 crore, much higher than our expectations of | 3140.8 crore owing to higher revenues as well as huge savings on several costs front such as lower marketing expenses and network & operating costs. EBITDA margins came in at 38.1% (up 340 bps QoQ), higher than the estimated 34.0% PAT came in at | 575.6 crore vs. expectation of | 347.4 crore wherein the beat at the PAT level was on better fundamentals. We have revised our estimates for Idea factoring in higher depreciation and interest emanating from the spectrum. The company’s indication at exercising circle wise discretion in upcoming auctions is reassuring albeit we have not factored in any spectrum related payouts now. We highlight that mobile broadband pick-up remains a requisite to justify huge investments. We maintain our BUY rating with a target price of | 130.

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