Analyst Research Report Snapshot

Title:

Reliance Comm. Ltd (RCOM) | Q2FY13 Results Flash Note

Price:

$35.00

Provider:

IndiaNivesh Securities Pvt Ltd

Date:

08 Nov 2012

Pages:

4

Type:

AcrobatPDF

Companies referenced:

RLCM.NS

Available for Immediate Download
Summary:

Result Updates Reliance Communication Ltd (RCOM) | Mixed performance - disappointment on net profit front Q2FY13 Results Flash Note |Reliance Communication Ltd (RCOM) Q2FY13 revenue and EBITDA was in-line with our and street; however, PAT was significantly below the consensus due to higher finance charges. The consolidated revenue de-grew by 2.2% qoq (+3.2% yoy) to Rs52.0bn (Bloom est: Rs.52.4bn). This led by (I) Wireless segment (down 2.3% qoq; nearly 63% to overall gross revenue), (II) Global enterprise business unit (down 0.7% qoq; nearly 34% to overall revenue) and (III) others (down 9.9% qoq, nearly 3% of overall revenue). During the quarter, consolidated EBITDA margin expanded 46.3 bps qoq to 31.5% (v/s Bloom est: 29.9%) due to lower loss in other segments. The company reported finance and depreciation charges of Rs.5930mn/Rs.9130mn (v/s Rs.5534mn/Rs9093 mn in Q1FY13). Despite weak currency, finance charges largely remain constant (+0.4% qoq) due to direct transfer of forex losses to foreign currency monetary item transaction difference account (FCMITDA). Rcom reported zero tax during the quarter (v/s tax benefit of Rs.40 mn Q1FY13). Minority interest stood at Rs.300mn (v/s Rs.290 mn in Q1FY13). The resultant net profit de-grew by 37.2% qoq to Rs.1020 mn (Bloom est: Rs.1,576 mn). Valuations and Outlook: At CMP of Rs.59, the stock is trading at 6.6x FY13E and 5.9x FY14E EV/EBITDA Bloomberg estimates, stretched relative to its peers. The company’s recent quarter performance was in-line with its peers. However, significant decline in the subscriber base was a surprise, resulted in significant jump in the major KPIs. We like Rcom’s strategy about 25% hike in pre-paid tariff. The uptake in 3G/Data usage looks positive in the long-run. However, delays in divestment of tower business and Flag Telecom listing remains a drag on stock price. Further high interest out-go remains a concern. We do not have a formal rating on the stock.

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