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    Reliance Communication Ltd.

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    ratika_bvp
    Reliance Communication reported quarterly revenues and profits that were below expectations. Total revenues grew 6.5% quarter-over-quarter due to moderate wireless revenue growth, while margins improved. The company added over 4.6 million wireless subscribers but average revenue per user and minutes of use declined. Reliance received licenses for GSM services across 14 circles and expects to launch pan-India GSM within a year. The analyst maintains a "Buy" rating and increased target price due to benefits from a dual wireless network and potential value unlocking from subsidiaries.

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    Reliance Communication Ltd.

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    ratika_bvp
    35 views2 pages
    Reliance Communication reported quarterly revenues and profits that were below expectations. Total revenues grew 6.5% quarter-over-quarter due to moderate wireless revenue growth, while margins improved. The company added over 4.6 million wireless subscribers but average revenue per user and minutes of use declined. Reliance received licenses for GSM services across 14 circles and expects to launch pan-India GSM within a year. The analyst maintains a "Buy" rating and increased target price due to benefits from a dual wireless network and potential value unlocking from subsidiaries.

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    Reliance Communication reported quarterly revenues and profits that were below expectations. Total revenues grew 6.5% quarter-over-quarter due to moderate wireless revenue growth, while margins improved. The company added over 4.6 million wireless subscribers but average revenue per user and minutes of use declined. Reliance received licenses for GSM services across 14 circles and expects to launch pan-India GSM within a year. The analyst maintains a "Buy" rating and increased target price due to benefits from a dual wireless network and potential value unlocking from subsidiaries.

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    Download as PDF, TXT or read online from Scribd
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    35 views2 pages

    Reliance Communication Ltd.

    Uploaded by

    ratika_bvp
    Reliance Communication reported quarterly revenues and profits that were below expectations. Total revenues grew 6.5% quarter-over-quarter due to moderate wireless revenue growth, while margins improved. The company added over 4.6 million wireless subscribers but average revenue per user and minutes of use declined. Reliance received licenses for GSM services across 14 circles and expects to launch pan-India GSM within a year. The analyst maintains a "Buy" rating and increased target price due to benefits from a dual wireless network and potential value unlocking from subsidiaries.

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    of 2

    Reliance Communication Ltd.

    Result Update Q3FY08

    Industry : Telecom CMP : Rs 613.00


    Price Target : Rs 774 Buy

    Result Analysis :
    Analyst:
    Brijesh Rajvanshi Rcom reported numbers for Q3FY08 which were below our
    +91 22 30286400 expectations. Total revenues grew by 6.5% q-o-q and 29.8% y-o-y
    brijesh@nsbl.co.in basis driven by a moderate growth of 6.3% q-o-q in wireless
    revenues, 4% q-o-q growth in enterprise business and flat growth
    of 1% in global revenues. EBITDA margins improved by 50 bps to
    43.2% q-o-q backed by lower network operating costs and SG&A
    Current expenses during the quarter. PAT margins stood strong at 28.6%
    due to the negative finance charges on account of forex gains.
    Recommendation Buy
    CMP (INR) 613.00
    Target Price (INR) 774.00 Segment-wise Performance:
    Key Data ➚ Wireless business: During the quarter Rcom added over
    Bloomberg code RCOMIN@IN
    4.64mn subscribers comprising both CDMA & GSM. ARPU
    Reuters code RLCM.BO has slipped sharply by 6.1% q-o-q as the company continues
    BSE code 532712 to expand its coverage deeper in rural areas. MOU has also
    NSE code RCOM dropped by 8.4% to 449 minutes due to the initiative of the
    Face Value (INR) 5.00 company to rationalize its tariff plans. We believe the pressure
    Market Cap. (INR Mn.) 1265248.00
    on ARPU will continue to be there but economies of scale and
    52 Week High (INR) 844.00
    52 Week low (INR) 371.25 cost efficiencies would help it to offset the impact of decreasing
    Average Monthly Volume (No.) 8909181 ARPU.

    Scrip Scan ➚ Global Business: Stiff competition on ILD & Global cards
    business and increasing pressure on RPM in NLD segments
    Equity (Rs mn) 10320.00
    FY09 EPS (INR) 252.00 have impacted the volume growth on both segments. While
    FY010 EPS (INR) 352.00 the ILD volume has just grown by 3.5% q-o-q, NLD traffic has
    Shareholding as on 31.12.07 (%) registered a negative growth of 1% q-o-q during the quarter
    ending Dec’2007.
    Promoter 66.16
    FIIs 13.39 ➚ Enterprise Business: During the quarter Rcom added 109000
    FIs 8.53 lines to its Enterprise segment. ARPL (Average revenue per
    Corporate Holdings 2.29
    Public 9.58 line) declined drastically to Rs 1,797, a drop of 7.8% q-o-q.
    Government 0.05 EBITDA margins continue to be steady at 48.7%.
    Total 100
    Key Developments :
    ➚ Rcom received license and spectrum to provide GSM service
    in 14 circles on a payment of Rs 1651 cr. Rcom expects to
    launch its GSM service on pan India level with in a period of
    Returns (%)
    one year. Apart from it, Rcom is also exploring the possibility
    1M 3M 6M 1YR
    of listing Flag after the completion of Yipes with it.
    Absolute (%) -17.9 -23.4 9.9 27.1
    Rel. to Sensex (%) -4.1 -11.7 -6.6 3.4 ➚ Capex Guidance: The Company has revised its capex guidance
    for FY08 to $ 5.2bn from earlier guidance of $ 4.5bn due to
    license fees paid for GSM in 14 circles and Yipes acquisition.
    For the year FY09, it has given a capex guidance of around
    $ 6bn.

    February 1, 2008 1
    Reliance Communication Ltd.

    Outlook & Valuation


    We expect Rcom to benefit from its dual offerings on pan India level
    as it would help it to increase its market share of net additions and
    further improve its market share. Rcom is also in process of exploring
    all possibilities to unlock the value in its subsidiaries. We expect
    apart from its core business growth, listing of Reliance Infratel and
    Flag Telecom would help it to unlock the value. At current market
    price, stock trades at 24.3x and 15.9x of its FY09E and FY10E earnings
    of Rs 25.2 and Rs 35.2 respectively. We recommend “BUY” with a 12
    months price target of Rs 774.

    Financials Summary (Rs.Mn)


    Particulars Q3FY08 Q2FY08A Q3FY07A FY07A FY08E FY09E FY10E
    Total Revenues 58974 55849 44785 174360 230721 306050 397536
    Intersegment charges 10232 10064 7232 29677 39457 49274 64003
    Net Revenues 48742 45785 37553 144683 191265 256776 333532
    % Change YoY 29.8 34.4 32.2 34.3 29.9
    % Change QoQ 6.5
    Total Operating Expenditures 27677 26167 22281 87474 109348 146362 188446
    EBITDA 21065 19618 15272 57209 81916 110414 145087
    % Change YoY 37.9 131.3 43.2 34.8 31.4
    % Change QoQ 7.4
    EBITDA Margin (%) 43.2 42.8 40.7 39.5 42.8 43.0 43.5
    Interest & Finance Cost -1518 -1125 -657 4 425 2273 2273
    Dep. & Amortisation 7252 6754 6524 24653 35781 47334 56506
    PBT & Extraordinary Items 15331 13989 9405 32552 45710 60806 86307
    Tax 1379 698 130 611 6399 6889 11220
    Ad. Net Profit 13729 13046 9244 31362 40381 53766 74937
    % Change YoY 48.5 606.3 28.8 33.1 39.4
    % Change QoQ 5.2
    Net Profit Margin (%) 28.2 28.5 24.6 21.7 21.1 20.9 22.5
    Equity -No. of shares(mn) 2064.0 2044.6 2044.6 2044.6 2064.0 2130.7 2130.7
    EPS 6.8 12.5 4.5 15.6 24.9 25.2 35.2
    Adj. EPS 6.7 6.4 4.5 15.3 19.6 25.2 35.2

    Disclaimer: The information contained in this report is obtained from reliable sources and is directed at market professionals
    and institutional investors. In no circumstances should it be considered as an offer to sell/buy or, a solicitation of any offer
    to, buy or sell the securities or commodities mentioned in this report. Networth, and/or its affiliates, may or may not have
    position in securities mentioned in this report. No representation is made that the transactions undertaken based on the
    information contained in this report will be profitable, or that they will not result in losses. Networth Stock Broking Ltd. and/
    or its representatives will not be liable for the recipients’ investment decision based on this report.

    Networth Stock Broking Ltd., 63-B, Mittal Court, 224, Nariman Point, Mumbai – 400021.

    February 1, 2008 2 Result Update

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