Idea Cellular (Q3 FY14) - Result Update - IIFL

Idea Cellular (Q3 FY14) – BUY - CMP Rs139, Target Rs200, Upside 43.9%

- Idea Q3 headline numbers were weaker than expected especially EBIDTA margin which was flat qoq vs expectation of 90bps rise qoq

- Revenue growth of 4.6% qoq (vs est +4.9% qoq) was driven by 4.1% sequential growth in traffic (est +5.2% qoq) and 0.4% qoq jump in rev/min, slightly lower than forecast of +0.7%

- EBIDTA margin was mostly flat qoq as company ramped up ad spends that nullified the beneficial impact of lower network opex and staff costs qoq; depreciation was higher due to additional charge of ~Rs600mn resulting from a revision in useful life of assets; reported PAT came in much below estimate on EBIDTA miss though the impact was cushioned by lower than anticipated interest expense

- Data subs (2G+3G) fell ~24% qoq to 25.5mn as company eliminated reporting of incidental users (<100Kb usage in 30 days) which boosted data ARPU to Rs91 vs Rs55 in previous quarter; data VAS accounted for 9.5% of service revenues while share of non data VAS continues to decline and now stands at 6.6%

- Data pricing witnessed further pressure as avg realized rate/MB fell by 4.5% qoq to 29.6p but volumes improved 19% qoq to 20.8bn MBs.

- Net debt fell to ~Rs89.5bn while capex during the quarter stood at Rs10.2bn; co retained FY14 capex guidance of Rs35bn ex-spectrum related payouts

- We tweak our earnings estimates on the back of 9M FY14 results and also introduce FY16 forecasts; the stock has corrected recently on the back of fears of heightened competitive intensity in upcoming auctions though this provides an attractive entry point in our view; reiterate BUY with unchanged 9-12mth target of Rs200.

Source : Equity Bulls

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