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Idea Cellular (Idea)s 2QFY2016 results have come in broadly in line with our estimates. The average Minutes of Use (MOU) dipped 5.4% qoq to 386min/subscriber/month (due to seasonality issues and increasing rural penetration), the average revenue per min (ARPM) grew 1.8% sequentially to Rs0.45, and thereby the average revenue per user (ARPU) declined by 3.8% on a qoq basis to Rs175/month. We maintain our Neutral view on the stock. Quarterly highlights: Idea’s consolidated revenue for the quarter came in at Rs8,723cr, down marginally by 2.2% qoq, owing to a decline in the mobility business. The mobility segment’s revenue dipped by 1.8% qoq to Rs8,509cr, on account of a decline in the overall MOU. The EBIDTA margin slipped 150bp qoq to 35.2% due to increase in personnel costs and on account of a 5% sequential increase in advertisement and business promotion expenses. The Net Profit at Rs809.3cr, declined by 13.1% on a sequential basis. Outlook and valuation: Going ahead, the realization would remain under pressure on account of heightened competition (both in the voice and the data segment). Further, post the entry of RJio, the pricing pressure would worsen further, particularly in the data segment. Also, Idea’s debt/equity ratio has risen from 0.7x in FY2015 to about 1x as at the end of 2QFY2016, on account of payments incurred towards spectrum acquisition and network expansion. The same is expected to worsen further to 1.4x by the end of FY2016, and would thereby impact return ratios. We remain cautious on Idea due to its worsening debt/equity ratio coupled with realization pressures. We maintain our Neutral rating on the stock.Download Full Report
|Investment Period||12 Months|
|MCAP BSE (Rs in Cr)||26,469.72|
|MCAP NSE (Rs in Cr)||26,451.71|
|Div Yield (%)||0.82|
Shareholding Pattern (%)
|Public & Others||3.0|