Idea Cellular - Q3 FY2013 Results - First Cut
Rajesh Desai
Dear Sir/Madam,
Idea Cellular Ltd announced its consolidated Q3 FY2013 results on 29 January 2013. While the company’s top line came in line with Bloomberg consensus estimates, its bottom line lagged street expectations. A glimpse of Idea’s Q3 FY2013 results is as follows:
Idea’s top line expanded 5.1% sequentially to `5,578.6 Crores. Increase in the company’s top line was mainly driven by addition of 2.9 Mn VLR subscribers during the quarter, which enabled it to report 5.2% sequential improvement in total minutes of usage to 132.2 Bn. However, impact of stellar growth in MoUs was not fully translated into the top line due to marginal decline in Average Rate Per Minute (ARPM). Idea registered ARPM of 41.1p in Q3 FY2013 compared with ARPM of 41.3p, reported a quarter earlier. The company attributed decline in ARPM to new VAS regulations that led to fall in contribution of ‘Non-Voice Revenues’. This factor also led to 39 basis points sequential decline in EBIDTA Margins to 26.4% during the quarter. Apart from declining ARPM, escalating Network Operating costs and Advertisement expenditure also impacted the margins. Furthermore, the company reported foreign exchange loss of `13.3 Crores in Q3 FY2013 compared with exchange gain of `18 Crores during Q2 FY2013. With this, Idea reported a 4.4% sequential fall in net profits to `229.6 Crores during the quarter. Barring currency impact, the company would have reported net profits of `242.9 Crores in Q3 FY2013 compared with net income of `222.0 Crores in Q2 FY2013.
Although Idea’s performance failed to provide positive surprises in Q3 FY2013, recent amendment in tariff schemes and incremental data rates might bode well for the company in upcoming quarters. Furthermore, the company winning back spectrum in all 7 circles, where its licenses get cancelled, keeps it a Pan India operator, by which it can entail economies of scales similar to its larger peers. Additionally, regulatory clarity in the industry may keep the investors’ interest in the stock. However, considering the company’s expensive valuations, we suggest it as an Accumulate at the current juncture.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
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CA. Rajesh Desai