Idea Cellular - 4QFY2013 Result Update - Angel Broking

For 4QFY2013, Idea Cellular (Idea) reported a strong set of results, beating our as well as market expectations on all fronts. The company's total network minutes grew considerably by 8.5% qoq, leading to a growth in network traffic to 143bn min. The average revenue per minute (ARPM) remained flat at Rs. 0.41 with non-voice revenues' share inching up to 15.2% from 14.6% in 3QFY2013. Idea announced its maiden dividend of Rs. 0.3 per share (~9% pay-out), suggesting a strong cash generation outlook. We maintain our Neutral view on the stock.

Quarterly highlights: For 4QFY2013, Idea reported a consolidated revenue of Rs. 6,061cr, up 8.7% qoq, on the back of a sharp qoq increase in minutes of usage (MOU) to 406min, up 5.7% qoq. The company's EBITDA margin increased by 119bp qoq to 27.6%. The EBITDA margin inch up was led by strong revenue growth along with almost flat network operating charges, qoq. The PAT came in at Rs. 308cr, up 35% qoq, led by strong operational performance and lower interest charges qoq at Rs. 224cr vs Rs. 242cr in 3QFY2013.

Outlook and valuation: Idea's 4QFY2013 results underscore declining competitive intensity and low volume elasticity, which should support strong EBITDA growth for Indian wireless incumbents. Most operators, including Idea, have been rationalizing pre-paid tariffs as RPM and profitability improvement remains a key focus area across the industry. Going forward, we expect ARPMs to improve as Idea hikes tariff via reduction of promotional offers. This should offset the rising input and regulatory costs. With a hike in tariff rates expected going ahead, we have factored in a 12% yoy revenue growth for FY2014. We expect revenues to witness an 11.0% CAGR over FY2013-15. The capex guidance for FY2014 stands at Rs. 3,500cr. The consolidated net debt of Idea declined ~1% qoq to Rs. 11,092cr. Idea continues to have one of the strongest balance sheets in the sector with net debt/EBITDA of ~1.9x and net debt/equity of ~0.8x at the consolidated level but the company still remains surrounded by regulatory uncertainties with regards one-time spectrum fee, 3G roaming pacts' cancellations and spectrum refarming. Currently, we maintain our Neutral rating on the stock.

Source : Equity Bulls

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