Idea Cellular - 3QFY2013 Result Review - Nirmal Bang

Idea Cellular's 3QFY13 revenue was above estimates by 2% at Rs55.8bn (up 5% QoQ) led by a 5.2% QoQ rise in minutes of usage.

However, revenue per minute (RPM) declined 0.5% QoQ on lower non-voice revenue. Margin declined 36bps QoQ to 26.4%, below our estimates by 89bps due to higher network, roaming and SG&A costs.

This, along with a forex loss of Rs133mn led net profit to fall 4.8% QoQ to Rs2.29bn

The stock has surged as much as 36% over the past three months even as voice revenue slows (below 10% YoY in 3QFY13), debt stays high and regulatory issues remain a bug bear, with the likelihood of higher spectrum costs for licence renewal, free roaming and critical issue of re-farming.

At the CMP, the stock trades at 6.4x EV/EBITDA on FY14E EBITDA. We have retained our Sell rating on the stock with a target price of Rs93.

Source : Equity Bulls

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