Axis securities is bullish on Reliance Comm and has recommended buy rating on the stock with a target price of Rs 97 in its research report dated January 27, 2016.
Axis securities's research report on Reliance Comm
RCOM’s India revenue (81% of revenue) was down ~1% QoQ, primarily due to expiry of its 2G license in 5 circles. Data volumes grew 6% QoQ led by higher 3G subscribers (23% share, up from 17% in Q2FY16). In line with industry, data pricing declined 5% QoQ. Globalcom revenue (19% of revenue) was up ~4% QoQ with EBITDA margin remaining steady at 17%.
We build in ~1% CAGR in voice revenue and ~12% CAGR in non-voice (including data) revenue for India wireless business over FY16-18. We expect FY18 consolidated EBITDA margin to improve to ~36.3% (FY15: ~34%) on increasing revenue contribution from GSM services and data growth. Maintain BUY with SOTP-based TP of Rs 97, based on ~5x FY17E EV/E assuming 8% wireless revenue market share, regulatory payouts (includes deferred payments and one-time outgo) and revised capex guidance. Our TP implies 47% upside from CMP of Rs 66. The stock trades at 16x /13x FY17E/FY18E EPS of ~ Rs 4.2/ Rs 5.0.
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