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Research
Idea Cellular - Q2 FY2014 Results - First Cut - Microsec
Posted On : 2013-10-27 18:56:26( TIMEZONE : IST )
Idea Cellular Ltd (Idea) announced its consolidated Q2 FY2014 results on 24 October 2013. While the company's revenues lagged Bloomberg consensus estimates its bottom line beat the expectations.
While Idea's top line reduced 3.3% sequentially to Rs. 6,323.3 Crores, its bottom line as well shrunk 3.3% q-o-q to Rs. 447.6 Crores in Q2 FY2014. Due to seasonal weakness, the company witnessed a 5.8% sequential decline in Voice Minutes of Use (MoU) to 138.8 Bn during the quarter. This factor remained the key cause for q-o-q decline in top line. However, an increase in Average Realized Rate per Minute (ARPM) helped Idea to partially offset the impact of declining MoUs on top line. Led by reduction of promotional minutes, the company's ARPM further rose to 44.7p during the quarter compared with 43.7p in Q1 FY2014. Furthermore, Idea continued to gain traction in the Data space with total data users rising to 33.6 Mn in Q2 FY2014 compared with 30.9 Mn data users, a quarter earlier. In addition, data usage per customer jumped to 178 MB during the quarter versus 160 MB in Q1 FY2014.
On the flip side, due to reduction in revenues and rising competition in the data space kept Idea's EBIDTA level performance under check. Consequently, while the company reported 5.0% sequential decline in EBIDTA, the EBIDTA margins dipped 58 basis points (bps) to 31.2%. Nevertheless, led by lower finance and tax outgo, Idea was able to limit the contraction in bottom line.
Considering the seasonally weak quarter, Idea's performance, barring sharp dip in MoUs, remained satisfactory in Q2 FY2014. Although the company has to face regulatory headwinds and the spectrum issues are yet to be resolved, its expected QIP, which can help Idea pare its debt, could keep its stock performance firm in near term. Furthermore, as the clearance and transparency has started emerging on the regulatory front, we remain positive on the sector as a whole. However, considering Idea's valuations at current levels, we suggest to BUY the stock on declines.
