Motilal Oswal is Neutral on Idea Cellular; Target 165

Motilal Oswal's research report on Idea CellularIDEA’s 2QFY16 consolidated EBITDA grew 14.8% YoY/-1.2% QoQ to INR32.3b (in line). PAT increased 7% YoY (declined 13% QoQ) to INR8.09b (our estimate: INR7.73b), led by lower-than-anticipated depreciation and amortization expense.Consolidated revenue grew 15% YoY but declined 1% QoQ to INR86.89b (our estimate: INR85.97b). Blended RPM grew ~2% QoQ while voice RPM declined 0.6% QoQ. Voice traffic grew 16.6% YoY and declined 3% QoQ— largely in line. Data business continued to exhibit strong growth, with traffic up 15% QoQ; realizations were down ~5% QoQ.Upcoming launch of Reliance JIO and ongoing significant increase in the proportion of data revenue could disrupt pricing as well as investment requirement. The stock trades at EV/EBITDA of 6.8 FY16E and 6.0x FY17E. We maintain Neutral with a revised price target of INR165/sh (earlier INR185/sh), based on 6.0x EV/EBITDA for core business and ~INR9m/tower for Indus stake.

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