Buy Idea Cellular; target of Rs 185: Achiievers

Achiievers research report on Idea CellularIdea Cellular Limited (Idea), a part of the Aditya Birla Group, is the third largest wireless operator in India with a Revenue Market Share (RMS) of 16.6% as of March 2014. Idea’s leadership position on Mobile Number Portability (MNP) has enabled it to stay competitive with the highest net subscriber addition (3.2 mn) in Q1FY15, taking the total customer base to 139 mn. Idea offers a range of high-speed mobile broadband devices including Android based 3G smartphones, dongles etc. Also, Idea’s wide portfolio of 3G Smartphones offers the latest in 3G applications and high-end data services at the most affordable prices. Idea operates through multiple segments: Mobility Services: Idea provides pan India GSM mobile services in all 22 service areas of India. The company recently launched its 3G services in Delhi this year using the recently acquired 900 MHz spectrum. In the recently concluded spectrum auction (February’14), Idea won LTE (Long Term Evolution) compatible 1800 MHz spectrum in another 8 service areas along with top-up GSM spectrum in 7 service areas. Idea holds 3G Spectrum (2100 & 900 MHz) in 12 service areas, which covers ~80% of Idea revenues and ~57% of Industry revenue including 900 MHz spectrum won for Delhi in Feb’14 auction. International Long Distance (ILD): Idea holds licenses for NLD, ILD, ISP and IP-1 services. Idea currently has over 84,000 km fibre cable transmission network to tap the future potential of wireless broadband. Passive Infrastructure (PI): Idea operates through subsidiary and joint venture and it provides passive infrastructure services in this segment. Idea owns 9,446 towers with a tenancy of 1.57 and also holds a 16% stake in Indus Towers through its subsidiary ABTL. In June 2014, the company has successfully completed its ‘Qualified Institutional Placement’ and allotted 223.9 mn fresh equity shares at an issue price of Rs134 per equity share (including premium of Rs124 per equity share) aggregating to Rs30,000 mn. “With the changing market scenario, we have seen telecom operators have started to gain pricing power, reflected in a steady uptick in ARPM over the past few quarters. During Q1FY15, Idea witnessed its ARPM increased by 3.2% YoY to 45.1 paisa, on the back of higher growth in weaker circles. Going ahead, the company would continue to strive for ARPM expansion. Continued expansion in network coupled with the strong demand scenario of 3G and 2G data, strong Cash flows, expanding spectrum profile and infrastructure, we expect Idea’s data segment performance would continue to outperform both on revenue and profitability front. Further, we believe Idea is well placed to withstand upcoming license renewals and increased competition in data. At a current market price (CMP) of Rs160, the stock trades at a P/E of ~20x FY16E, earnings. We recommend ‘BUY’ with a target price of Rs185, which implies potential upside of ~16% to the CMP from 1 year perspective,” says Achiievers research report.

For all recommendations, click here 

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More