Buy Idea Cellular Ltd For Target Rs.140Wireless traffic momentum to sustain
RPM, margin outlook positive; Offers 18% EBITDA CAGR, 6.5% FCF yield We met Idea Cellular's management for an update on business trends and outlook, and following are the key highlights:
* We expect wireless traffic momentum to sustain given 1) seasonal strength, 2) specific circle-wise exits of certain operators and 3) limited demand elasticity.
* RPM outlook positive; maintain est. of ~1% QoQ growth in 4QFY13E and ~2% CAGR over FY13E-15E.
* EBITDA margin improvement to accelerate from 50bp YoY in FY13E to 140bp in FY14E on operating leverage, yield improvement and lower subscriber acquisition costs.
* Easing competitive intensity can drive upside risks to RPM/margin estimates. Every 1p RPM hike drives 9% increase in Idea's fair value, assuming 8x EV/EBITDA and no elasticity.
* Expect 18% EBITDA CAGR and 59% PAT CAGR over FY13-15E led by 11% minutes CAGR, 2% RPM CAGR and ~230bp cumulative EBITDA margin expansion. Valuation attractive, with FY14E FCF yield of 6.5% and EV/EBITDA of 6.6x. Buy with a target price of INR140.
Traffic momentum to sustain
Voice minutes growth is expected to maintain a steady momentum despite lower discounting and thus highlighting limited demand elasticity. We expect Idea's 4QFY13E QoQ traffic growth to better 3QFY13 growth of 3%. We believe exit of certain operators from specific circles (Uninor, MTS) would have positively contributed to the volume growth for incumbents like Idea.
RPM outlook positive
RPM outlook is positive and we maintain our expectation of ~1% QoQ RPM growth in 4QFY13E and ~2% YoY growth in FY14E. We expect blended RPM to improve from 41.3p in FY13E to 43.2p in FY15E.
Margin improvement to accelerate
FY13E is set to be the second consecutive year of EBITDA margin expansion, with an estimated 50bp YoY accretion in FY13E on top of 160bp expansion in FY12. We assume a further 140bp margin improvement in FY14E for Idea as we expect operating leverage, yield improvement and lower sales & distribution costs to more than offset the increase in network/fuel costs.
Receding competitive intensity can drive upside to RPM and margins
Receding competitive intensity can provide upside risks to our RPM estimates. Every 1p hike in RPM drives a 9% increase in Idea's valuation, assuming 8x EV/ EBITDA and no elasticity.
18% EBITDA CAGR; 6.5% FCF yield; Buy
We expect 18% EBITDA CAGR and 59% PAT CAGR over FY13-15E, driven by 11% traffic CAGR, 2% RPM CAGR and ~230bp cumulative EBITDA margin expansion. We expect FY14E FCF of ~INR23b, implying an FCF yield of 6.5%. Buy with a target price of INR140 based on 8x FY15E EV/EBITDA, ex-Indus, INR5m/tower for stake in Indus Towers, and INR129b (INR39/share) for potential spectrum liability.
Buy McNally Bharat Engineering Company Ltd For Target Rs.81.00McNally Bharat Engineering Company Ltd is one of the leading Engineering Companies in India engaged in providing turnkey solutions in the areas of Power, Steel, and Aluminum etc.
* McNally Bharat received an order for Civil & Structural Works for a Refinery Project for a value of Rs. 171.84 crores.
* During the quarter, the robust growth of Net Sales is increased by 6.14% to Rs. 5205.50 million.
* The Company has received an order for complete Balance of Plant Equipment for a value of Rs 513.19 crores for 1X300 MW Power plant at Vizag.
* The Company has received an order for Civil & Structural Works for development of Residential Towers & Villas at Chennai for a value of Rs. 40.35 crores.
* McNally Bharat's fully owned subsidiary MBE Mineral Technologies Pte Ltd acquired 10 mn shares of Specialist Energy for 5 mn pounds taking McNally's holding in the company to 41.67% from 25%.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 8% & 17% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
McNally Bharat Engineering Company Ltd is one of the leading Engineering Companies in India engaged in providing turnkey solutions reported its financial results for the quarter ended 31st Dec, 2012.
The company’s net profit decreased to Rs.54.40 million against Rs.125.10 million in the corresponding quarter ending of previous year, a decrease of 56.51%. Revenue for the quarter rose 6.14% to Rs.5205.50 million from Rs.4904.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.75 a share during the quarter, registering 56.51% decline over previous year period. Profit before interest, depreciation and tax is Rs.350.20 millions as against Rs.346.60 millions in the corresponding period of
the previous year.
Outlook and Conclusion
* At the current market price of Rs.70.80, the stock P/E ratio is at 7.17 x FY13E and 6.80 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.88 and Rs.10.42 respectively.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 8% and 17% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 3.84 x for FY13E and 3.37 x for FY14E.
* Price to Book Value of the stock is expected to be at 0.61 x and 0.56 x respectively for FY13E and FY14E.
* We recommend ‘HOLD’ in this particular scrip with a target price of Rs.81.00 for Medium to Long term investment.
Buy IDFC Limited For Target Rs.162.00IDFC Limited is India's leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services.
* During the quarter, the robust growth of Net Profit is increased by 21.08% to Rs. 4686.70 million.
* During the quarter, IDFC Ltd has allotted 1,053,785 fully paid up equity shares of Rs. 10/- each to the employees of the Company in terms of the Employees Stock Option Scheme (ESOS).
* IDFC Alternatives Ltd the private investment arm of IDFC announced the equity investment of Rs.155 crores in Manchar based Parag Milk Foods.
* The planning commission estimates $1 trillion investments in the infrastructure sector during the current plan period ending in March 2017.
* Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 13% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
IDFC Ltd is India's leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services, reported its financial results for the quarter ended 31st Dec, 2012. The third quarter witnesses a healthy increase in overall sales as well as profitability.
The company net profit jumps to Rs.4686.70 million against Rs.3870.84 million in the corresponding quarter ending of previous year, an increase of 21.08%. Revenue for the quarter rose 24.46% to Rs.19691.80 million from Rs.15822.31 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.3.09 a share during the quarter, registering 17.01% increase over previous year period. Profit before interest, depreciation and tax is Rs.18726.40 millions as against Rs.14220.79 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.143.00, the stock P/E ratio is at 12.34 x FY13E and 11.63 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.11.59 and Rs.12.29 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 26% and 13% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 8.22 x for FY13E and 7.34 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.56 x and 1.37 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.162.00 for Medium to Long term investment.
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FIIs infuse $10-billion in equity market in 2013 so far
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Overseas investors have poured in USD 1.4 billion into Indian equities
in March, taking the total investment tally to USD 10 billion for the
calendar year 2013 so far.
oreign Institutional Investors (FIIs) infused a net amount of USD 1.4
billion (about Rs 7,547 crore) in Indian stock market in March so far
taking the total inflows to USD 10 billion (Rs 54,045 crore) in less
than three months of 2013.
FIIs had pumped in USD 4.57 billion (Rs 24,440 crore) in February and USD 4.05 billion (Rs 22,000 crore) in January.
Market analysts attributed huge inflows into Indian equities to a slew
of measures taken by the government, including the postponement of
General Anti Avoidance Rule (GAAR) implementation by two years to April
1, 2016 and partial decontrol in diesel prices.
Additionally, easing of interest by Reserve Bank of India (RBI) and
subsequent impact of improved liquidity position have further boosted
FIIs inflow.During March 1-22, FIIs were gross buyers of shares worth Rs 57,303
crore, while they sold equities amounting to Rs 49,756 crore,
translating into a net investment of Rs 7,547 crore (USD 1.4 billion),
as per Sebi data.
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