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Revenue growth remains muted

Our view

Overall, revenue growth remains muted; while EBITDA margin declined due to higher other expenses. We expect Data segment to continue to drive the overall performance of the company; whereas the voice segment is expected to decline in line with industry trend.  The moderation in capex intensity would help to keep net debt under control. We maintain our current ADD rating on the stock with revised target price of Rs 1,560/share.

Result Highlights

* Reported revenue of Rs 41.8bn( up 0.3% QoQ). Sequential growth is due to improvements across all data segments.

* Voice revenue was down 8.6% QoQ to Rs 5.5bn. Data revenue reported modest growth of 3% QoQ to Rs 32.3 bn.

* Data Business EBITDA was at INR 10.4 bn witnessing a growth of 3.6% YoY and a decline of 0.8% QoQ. EBITDA margins were at 32.2% ‐ an increase of 10 bps over same quarter last year

* Payment business continues to remain impacted due to 3rd covid19 wave . Average daily transaction was 57 compared to 56 in Q2FY22.

* EBITDA margin declined by 79 bps QoQ  to 25.9% on higher other expenses( up 9.5% QoQ)

* Capex was Rs 4bn in Q3FY22 compared to Rs 3.4bn in Q2FY22

* Net debt declined by Rs 5.7bn( Rs 72.9 bn) on account of better operating cash flow generation. Average cost of debt was Rs 2.69% for the quarter

Valuation

The stock trades at EV/EBITDA of 9.0x on FY24E EBITDA. While, it has been able to generate consistent EBITDA margin, the revenue growth has been muted for the company. We expect data segment to pick up going ahead that will drive revenue growth.  We value the stock at EV/EBITDA of 9.5x on FY24E EBITDA, arriving at target price of Rs 1,560/share

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