IDEA CELLULAR WILL HIT 77 NEXT WEEK

Idea Cellular will go up to Rs. 77 within next week before budget by Mittal kawita

Motilal Oswal has maintained buy rating on Idea Cellular with a price target of Rs 77 in its Feb 25, 2010 research report.

Idea Cellular's 3QFY10 PAT of Rs 1.7b (down ~23% YoY and QoQ) was significantly above estimates. Consolidated revenue grew 15.3% YoY and 5.9% QoQ to Rs 31.5b led by robust traffic growth of 14.9% QoQ (vs 3.3% QoQ growth in 2QFY10). RPM decline of 7.8% QoQ also surprised positively (our est of 10% QoQ decline). Consolidated EBITDA grew 16.7% YoY and remained flat QoQ despite higher new circle losses and ESOP provision. While competitive intensity remains high, we are positively surprised by the robust volume pick-up and sustained EBITDA margin in established circles.

Solid operating metrics: Idea (ex-Spice) reported 3QFY10 ARPU of Rs 200 (vs est Rs 192), down 24.8% YoY an 4.3% QoQ. RPM declined 19.6% YoY and 7.8% QoQ to Rs 0.51. Total volumes carried on the network increased 43.7% YoY and 14.9% QoQ to 57.8b minutes. This is the highest traffic growth reported by Idea in the past six quarteRs . Minutes of use per subscriber increased 3.7% QoQ to 389 minutes, likely on seasonal strength, MOU elasticity and regain of volume market share post tariffs cuts. This is the fiRs t instance of MOU growth for Idea in the past six quarteRs . Churn rate increased to 9.1% per month, reflecting significant volatility in the pre-paid market.