ACMIIL Research has released a report on Idea Cellular?s third quarter results for 2010-11.
The highlights of the report include:
- Idea? consolidated total revenue grew by 26 per cent YoY and 8.1 per cent Q-o-Q to Rs 40 billion. The growth was mainly led by contribution from the new launches and Indus and strong operational performance.
- Idea?s overall minutes grew by mere 8.6 billion in 3QFY11 and were up 10 per cent QoQ to 93.5 billion.
- EBITDA margin is stable at 24 per cent compared to 2QFY11. Although the subscriber acquisition cost increased significantly during the quarter, volume led cost efficiencies resulted in margins remaining flat.
- Interest cost during the quarter has gone down on YoY and QoQ basis to Rs 941 million. Interest expenses relating to 3G-auction fee of Rs 1.24bn were capitalized during the quarter.
- With strong revenues, stable margins and lower interest expenses, the net profits registered a 43 per cent YoY growth to Rs 2.4 billion.
- The capex guidance for FY11 has been revised from Rs 40 billion to Rs 30 billion.
Valuation and recommendation
Idea reported robust 3QFY11 results on back of strong seasonal demand. Idea registered the highest net adds during the quarter. The company has witnessed strong growth in the old as well as new circles. Further Indus tower also have aided revenue growth for Idea. On the back of volume led efficiencies, the company was able to maintain stable margins. However, going forward, net profit margins are expected to be under pressure on account of the higher depreciation and interest cost due to 3G.
In view of this, we maintain our ?HOLD? recommendation with a price target of `75.
The report is attached below.
