Buy Idea cellular; target of Rs 130:ICICIDirect

ICICIDirect's research report on Idea CellularIdea reported a 5.13% QoQ increase in total minutes on the network to 199.1 billion minutes vs. expectations of 201.3 billion minutes, owing to lower-than-expected subscriber growth and MoU increase. Voice revenues came in at | 6310.4 crore, up 2.4% QoQ. Voice revenues also remained lower-than-expected owing to the fall in the voice tariff to 31.6 paisa vs. an expectation of 31.9 paisa. Data revenues exhibited 7.0% QoQ growth to | 1792.8 crore, forming 20.2% of mobility revenues due to 12.4% QoQ increase in the data consumption per subscriber to 684 MB in the quarter. Data ARMB continued to decline, falling 4.8% QoQ to 21.1 paisa EBITDA came in at | 3128.5 crore, lower than our expectations of | 3247.3 crore owing to the higher decline in the realisations. EBITDA margins came in at 34.7%, down 46 bps QoQ PAT came in at | 764.2 crore vs. estimate of | 839.9 crore. The miss was due to lower-than-expected margins and higher depreciationWe have revised our estimates for Idea factoring in higher depreciation and interest emanating from the spectrum. Though the company guided for a cautious approach on the upcoming auctions, any splurge could dent profitability further. The stock has corrected ~23% in the last month with fears of damage with RJio launch. There could be further downside risks as and when Jio launches its services. We reduce the target price to | 130, maintaining BUY at this levels.

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