Buy Idea Cellular; target of Rs 192: Firstcall Research

Firstcall Research 's report onIdea Cellular

“Idea Cellular Limited (“Idea”) is the third largest wireless operator in India with a Revenue Market Share (RMS) of 17.2% (Q2FY15). In the 15 Established Service Areas, its RMS stands at a strong level of 20.4% (Q2FY15). The company carries around 1.86 billion minutes on a daily basis during the quarter Q3FY15. Idea is the sixth largest mobile telecommunications company (counted on operations in a single country) in the world based on number of subscribers (as determined from data issued by GSMA Intelligence, as of June 2014). Idea is part of the Aditya Birla Group, which is one of the largest business groups in India. The Aditya Birla Group is a conglomerate with operations in more than 30 countries. The Aditya Birla group has a history of over 50 years and has businesses in, among others, mobile telecommunications, metals and mining, cement, carbon black, textiles, garments, chemicals, fertilizers, life insurance and financial services industries.”

“Idea Cellular Ltd the Third largest wireless operator in India, reported its financial results for the quarter ended 31st Dec, 2014. The company’s consolidated net profit jumps to Rs. 7670.60 million against Rs. 4677.30 million in the corresponding quarter ending of previous year, an increase of 64.00%. Revenue for the quarter rose by 21.24% to Rs. 80174.70 million from Rs. 66130.60 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 2.13 a share during the quarter, registering 51.26% increase over previous year period. EBITDA (including other income) rose by 40.36% to Rs. 28852.60 millions as against Rs. 20556.80 millions in the corresponding period of the previous year.”

“At the current market price of Rs.172.20, the stock P/E ratio is at 20.24 x FY15E and 17.72 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.8.51 and Rs.9.72 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 51% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 6.56 x for FY15E and 5.65 x for FY16E. Price to Book Value of the stock is expected to be at 2.74 x and 2.31 x respectively for FY15E and FY16E. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.192.00 for Medium to Long term investment”, Says Firstcall Research report.

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