Idea Cellular
Performance highlights
(` cr) Net revenue EBITDA EBITDA margin (%) PAT 2QFY12 4,620 1,187 25.7 106 1QFY12 4,521 1,204 26.6 177 % chg (qoq) 2.2 (1.4) (95)bp (40.3) 2QFY11 3,659 879 24.0 180 % chg (yoy) 26.3 35.0 167bp (41.2)
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Telecom 30,180 0.6 104/56 714,267 10 16,786 5,050 IDEA.BO IDEA@IN
`91 -
For 2QFY2012, Idea Cellular (Idea) reported modest revenue growth, which was in-line with our expectation; however, the company disappointed on the bottom-line front. The major highlight of the result was inching up of average revenue per minute (ARPM) by 4.1% and VAS share in mobility revenue increasing to 13.2% from 12.1% in 1QFY2012. We maintain our Neutral view on the stock. Quarterly highlights: For 2QFY2012, Idea reported consolidated revenue of `4,620cr, up 2.2% qoq, on the back of 4.1% qoq growth in ARPM to `0.427/min and subscriber growth of 5.4% qoq with end-of-period (EoP) subscriber base standing at 100.2mn. The effect of these positive factors was partially overshadowed by the negative impact from the decline in minutes of usage (MOU) by 6.9% qoq to 364min from 391min in 1QFY2012. EBITDA margin decreased by 95bp qoq to 25.7% due to higher employee costs and roaming and access charges. However, EBITDA per minute (EPM) stood flat qoq at `0.11. PAT came in at `106cr, down 40.3% qoq, due to higher interest costs of `294cr and higher depreciation and amortization expenses of `737cr on account of 3G-related expenses. Outlook and valuation: Idea posted growth in ARPM again for the second consecutive quarter on account of increased VAS share in mobility revenue and tariff hikes undertaken from August 2011. Management indicated that the full effect of hiking tariff rates would flow in from 3QFY2012, which will further aid the companys ARPM. This will, in turn, scale up ARPM, which we expect will post an 8.3% CAGR over FY2011-13E. With increasing ARPM, higher VAS share as a percentage of total revenue and rising number of subscribers for 3G services, we expect revenue to witness a 22.8% CAGR over FY2011-13E. We value the stock at EV/EBITDA of 6.5x FY2013E i.e., at 10% discount to Bharti Airtels EV/EBITDA multiple, which gives us a fair value of `93. Hence, at current levels, we maintain our Neutral rating on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 46.0 8.7 11.8 33.5
3m
1yr
FY2009 10,131 18.6 881 27.8 2.8 32.2 2.2 6.4 6.2 3.6 12.8
FY2010 12,447 22.9 954 8.3 27.4 2.9 31.6 2.5 8.0 7.0 3.0 11.1
FY2011 15,503 24.6 864 (9.4) 24.5 2.7 33.6 2.5 7.0 5.5 2.6 10.7
FY2012E 19,610 26.5 807 (6.6) 26.0 2.4 37.4 2.3 6.2 8.5 2.1 8.2
FY2013E 23,363 19.1 1,166 44.4 27.1 3.5 25.9 2.1 8.2 10.7 1.7 6.4
Srishti Anand
+91 22 3935 7800 Ext: 6820 srishti.anand@angelbroking.com
Ankita Somani
+91 22 3935 7800 Ext: 6819 ankita.somani@angelbroking.com
2QFY12 4,620 3,433 1,187 737 450 294 156 50 106 106 0.3 25.7 9.7 2.3
1QFY12 4,521 3,317 1,204 703 501 246 255 78 177 177 0.5 26.6 11.1 3.9
% chg (qoq) 2.2 3.5 (1.4) 4.9 (10.3) 19.3 (38.9) (35.6) (40.3) (40.3) (40.3) (95)bp (136)bp (163)bp
2QFY11 3,659 2,780 879 582 297 103 194 14 180 180 0.5 24.0 8.1 4.9
% chg (yoy) 26.3 23.5 35.0 26.6 51.5 185.9 (19.7) 250.7 (41.2) (41.2) (41.2) 167bp 162bp (262)bp
1HFY12 9,141 6,750 2,391 1,439 951 540 411 128 283 283 0.9 26.2 10.4 3.1
1HFY11 12,447 9,040 3,407 2,015 1,392 401 84 1,075 121 954 954 3 27.4 11.2 8.3
% chg( yoy) (26.6) (25.3) (29.8) (28.6) (31.7) 34.9 (61.8) 5.3 (70.3) (70.3) (70.3) (122)bp (78)bp (524)bp
3.7 2.3
%
)
(5.1)
MOU (min)
Source: Company, Angel Research
During the quarter, ARPM growth of 4.1% qoq to `0.427/min came in as a positive surprise. Factors that led to the increase in ARPM were: 1) higher contribution of VAS to revenue, 2) increased roaming revenue and 3) higher promotional tariff. Going ahead, the full impact of tariff hikes undertaken from August 2011 will flow in, which will further aid the companys ARPM.
(`/min)
0.45 0.40
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
ARPM (`/min)
VAS as a share of total revenue increased to 13.2% in 2QFY2012 compared to 12.1% in 1QFY2012.
2QFY12
(%)
0.50
(%)
11 10 9
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
Idea reported net subscriber addition of 5.1mn subscribers in 2QFY2012, which is the highest among all incumbents in the telecom sector. The companys total subscriber base, as of EoP September 2011, stood at 100.2mn.
(mn)
4 2 0
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
Thus, increased ARPM, higher VAS share in mobility revenue and modest subscriber net additions in 2QFY2012 arrested the steep downfall in average revenue per user (ARPU), which was negatively affected by declining MOU. ARPU came in at `155/month from 2QFY2012 from `160/month in 1QFY2012, down 3.1% qoq.
2QFY12
2QFY12
(`/month)
0.6 (1.4)
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
ARPU (`/month)
(`/min)
0.10
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
2QFY12
2QFY12
(%)
(%)
10 0 (10) (20) (30) (40) (50) (42) (35) New service areas (27) (29) (36) Consolidated 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12
Indus
(%)
40
License fee
Employee cost
EV (`cr)
Dec-07
Dec-08
Dec-09
Dec-10
Apr-07
Apr-08
Apr-09
Apr-10
Aug-07
Aug-08
Aug-09
Aug-10
Apr-11
5
EV
17
14
11
Aug-11
Parameter (` cr) Net revenue EBITDA Interest expense PBT Tax PAT
10
11
Key Ratios
Y/E March Valuation ratio (x) P/E (on FDEPS) P/CEPS P/BVPS Dividend yield (%) EV/Sales EV/EBITDA EV/Total assets Per share data (`) EPS (Fully diluted) Cash EPS Dividend Book value DuPont analysis Tax retention ratio (PAT/PBT) Cost of debt (PBT/EBIT) EBIT margin (EBIT/Sales) Asset turnover ratio (Sales/Assets) Leverage ratio (Assets/Equity) Operating ROE Return ratios (%) RoCE (pre-tax) Angel RoIC RoE Turnover ratios (x) Asset turnover (fixed assets) Receivables days Payable days 0.6 10 162 0.7 12 156 0.6 12 173 0.7 12 171 0.9 12 169 6.2 9.2 6.4 7.0 7.3 8.0 5.5 7.0 7.0 8.5 10.1 6.2 10.7 12.4 8.2 0.9 0.7 0.1 0.4 1.7 6.4 0.9 0.8 0.1 0.6 1.7 8.0 0.9 0.7 0.1 0.6 2.0 7.0 0.7 0.5 0.1 0.7 2.0 6.2 0.7 0.6 0.1 0.9 1.9 8.2 2.8 6.9 0.0 41.8 2.9 9.0 0.0 36.0 2.7 10.0 0.0 37.2 2.4 11.1 0.0 39.7 3.5 14.1 0.0 43.2 32.2 13.2 2.2 3.6 12.8 1.6 31.6 10.2 2.5 3.0 11.1 1.9 33.6 9.2 2.5 2.6 10.7 1.7 37.4 8.2 2.3 2.1 8.2 1.6 25.9 6.5 2.1 1.7 6.4 1.5 FY2009 FY2010 FY2011 FY2012E FY2013E
12
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Idea Cellular No No No No
Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
13