Motilal Oswal is bullish on Vodafone Idea has recommended buy rating on the stock with a target price of Rs 20 in its research report dated May 14, 2019.
Motilal Oswal's research report on Vodafone Idea
A stellar jump in APRU helped clear the major hurdle of a continued downtrend in revenue, which stood flat sequentially at INR117.8b (in-line) in 4QFY19. This, coupled with INR2b one-offs, led to strong EBITDA growth of 57% QoQ to INR17.9b. Interestingly, even adjusted for one-offs, EBITDA was up by a robust 39% QoQ (13% beat), primarily led by merger synergies (margin expanded 380bp to 13.5%). Adjusted for exceptional item and the DTA impact, IDEA reported a net loss of INR40.6b (v/s INR62.1b in 3Q).
Leverage is likely to remain high over the near term, but IDEA’s proven execution capabilities, strong promoter backing and strong operating leverage opportunity from any ARPU increase should come handy, in our view. We maintain our Buy rating with a TP of INR20, ascribing 13x to FY21E EBITDA.
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