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April 6, 2015
186-191
Price Target
240.00
Stoploss
169.00
52 Week High
193.05
52 Week Low
129.15
50 days EMA
166.00
157.00
52 Week EMA
158.00
9,400
8,900
8,400
7,900
7,400
6,900
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
6,400
Idea Cellular
100%
26%
-8%
-60%
2010
2011
2012
Year
2013
We expect the stock to rally towards | 240 over the medium-term being the depth of the rounding pattern (188130=58 points) as projected from the historical highs of | 188 (188+58=| 246)
65%
20% 18%
Target: | 240.00
The renewed appetite to own the stock even at historical highs has anchored declines over the past couple of
weeks and eventually launched the share price in a higher orbit. Volumes doubled their 50-week average (3 crore
shares) over the past three weeks underscoring the growing appetite to own the stock
BSE100
20%
Among oscillators, the weekly MACD indicator that flattened above the signal line (reading of 0) is seen diverging
from its nine week average signalling a strong undercurrent in the share price from a medium-term perspective,
thus validating the positive trend in price
2014
The share price is seen concluding five quarter rounding consolidation pattern
signalling next medium term up leg
Pattern implication suggests the price target of 240 over medium term
188
Research Analyst
Dharmesh Shah
dharmesh.shah@icicisecurities.com
Karan Mittal
Karan.mittal@icicisecurities.com
Faster retracement of
last falling segment
63
Basing pattern at
key supports
The renewed appetite to own the stock is evident from the rising
volumes which doubled 50-week average
MACD diverging from its 9 week average highlights the underlying momentum in the stock
Page 2
Fundamental view
Stock Data
Particular
Market Capitalization (| Crore)
Total Debt (FY14) (| Crore)
Cash and Investments (FY14) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value
DII holding (%)
FII holding (%)
Amount
69,629.2
18,775.6
188.1
88,216.7
194 / 126
3,597.5
| 10
4.4
24.3
FY14
32.7
36.3
10.6
3.9
11.9
10.8
FY15E
22.5
25.0
10.3
3.0
13.3
8.4
FY16E
19.7
21.9
8.3
2.6
13.3
10.5
FY17E
16.0
17.7
7.0
2.3
14.1
12.4
FY16E
36,045
12,771
3,533
9.8
FY17E
38,771
14,017
4,364
12.1
FY14
26,519
8,334
1,968
5.9
FY15E
31,654
10,707
3,095
8.6
Idea cellular is the third largest telecom operator and has exhibited higher than industry subscriber and revenue
growth over the past few years. Subscribers have grown at 33.5% CAGR (FY08-14) while revenue has grown at
25.7% CAGR over the same period. Also, its subscriber and revenue market share have increased from 11% and
9.6% in FY08 to ~18.1% and 17.2%, respectively. Also, Idea has been able to garner highest share in net adds with
a net adds market share of 28.7%. Going ahead, we expect subscriber growth to remain higher than industry at
7.9% CAGR over FY14-17E to reach 171 million subscribers.
After years of bleeding ARPM, a decline from 53 paisa in 2011 to 41 paisa in FY13, telcos are finally able to take
price hikes. With several new operators scaling down operations, telcos have been able to curb discounted minutes
at a rapid pace. ARPMs have expanded from a low of 41 paisa in Q4FY13, to 46.3 paisa in Q3FY15. This has also
been aided by increasing data usage, which has increased from 11.4 billion MB in Q4FY13 to 46.0 billion MB in
Q3FY15 while revenue from data offerings has increased from | 393 crore to 1247 crore in the same period. Led by
higher data usage and sustained price hikes, we expect the ARPM to expand to 50.3 paisa by FY17E. The company
has been able to pass on price hikes effectively as visible from increasing MoUs. Going ahead, with the expansion
in the voice ARPMs we expect voice volumes to grow at a decent rate of 8.7% over FY14-17E to 756.2 billion
minutes.
Data revenue has grown at an exponential rate of 88% in FY14 reaching | 2325.2 crore from | 1234.0 crore a year
ago. With the increased penetration of smart phones, data subscribers for Idea rose from 2.6 crore in FY13 forming
21.6% of the total subscribers. We expect it to reach 5.3 crore in FY16 forming 30.8% of the total subscribers. The
data usage per subscriber has also risen from 148 MB in FY13 to 270 MB in FY14, hence reaching 793 billion MB
data traffic by FY14. Recently, Idea has invested about | 41000 crore to augment its spectrum portfolio. The
company has been able to buy back sufficient spectrum in all its expiring circles, which remained a major concern
before auctions. The expiring circles had over 70% contribution to overall revenues. Hence, the positive emanating
from the winning back of spectrum outweighs the more than expected payout concern
Although the spectrum related payout will increase the debt burden by about | 14016.8 crore and, hence, lead to
an additional interest cost burden and depreciation cost causing a PAT dilution of about 8%, it would be offset by
imminent price hikes. In addition, its ability to now corner the upcoming data boom would improve the revenue
profile of the company. Moreover, the overhang of spectrum expiry has passed, which should aid investor
sentiments. We arrive at a revised target price of | 215 valuing it on a DCF methodology with revised revenue
assumptions.
Page 3
NOTES:
It is recommended to enter in a staggered manner within the prescribed range provided in the report
Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report on
closing basis
The recommendations are valid for three to six months and in case we intend to carry forward the position,
it will be communicated through separate mail.
It is recommended to spread out the trading corpus in a proportionate manner between the various
technical research products
Please avoid allocating the entire trading corpus to a single stock or a single product segment
Within each product segment it is advisable to allocate equal amount to each recommendation
For example: The Daily Calls product carries 3 to 4 intraday recommendations. It is advisable to allocate
equal amount to each recommendation
Page 4
Products
Allocations
Product wise
Max allocation
allocation
in 1 stock
Return Objective
Number of Calls
Frontline Stocks
Mid-cap stocks
Duration
Daily Calls
8%
2-3%
3-4 Stocks
0.50-1%
2-3%
Intraday
6%
3-5%
7-10 p.m
4-5%
7-10%
Opportunity based
Weekly Calls
8%
3-5%
1-2 Stocks
5-7%
7-10%
1 Week
Weekly Technical
8%
3-5%
1-2 Stocks
5-7%
7-10%
1 Week
Monthly Call
15%
5%
2-3 Stocks
7-10%
10-15%
1 Month
Monthly Technical
15%
2-4%
5-8 Stocks
7-10%
10-15%
1 Month
Techno Funda
15%
5-10%
1-2 Stocks
6 Months
Technical Breakout
15%
5-10%
1-2 Stocks
3-6 Months
Cash in Hand
10%
100%
Page 5
Pankaj Pandey
Head Research
pankaj.pandey@icicisecurities.com
Page 6
Disclaimer
ANALYST CERTIFICATION
We /I, Dharmesh Shah, Karan Mittal Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
Page 7