Reduce Vodafone Idea Ltd For Target Rs.6 - Yes Securities
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Our view
The operating performance was weak in the quarter (below expectation). The loss in subscribers picked up in the quarter mainly due to the impact from second covid19 wave. Also, the net debt has increased significantly by around Rs 107bn QoQ. Now, it depends on the relief from government for survival as it would be extremely difficult to raise much needed capital from other investors for managing its financial obligations under current circumstances of the company. We maintain REDUCE Rating on the stock with target price of Rs 6. Trades at 9.7x EV/EBITDA on FY23E EBITDA.
Result Highlights
* Reported revenue of Rs 91, 523 mn, down 4.7% QoQ. The decline was led by 2.8℅ sequential decline in ARPU to Rs 104. The number of mobile subscribers declined by 12.4 mn( 4.6℅ QoQ) during the quarter, primarily due to impact of 2nd covid wave on 2G subscribers.
* The number of 4G customers declined by 1 mn during the quarter
* EBITDA margin declined by 538 bps QoQ to 40.5% on lower revenue base for the quarter
* Capex for the quarter was just Rs 9.4 bn compared to Rs 15.4 bn in Q4FY21, reflecting stress in the balance sheet.
* Net debt increased by Rs 107 bn QoQ to Rs 1, 907 bn ( 11x Net Debt / EBITDA on FY21 EBITDA). It includes deferred spectrum obligation of Rs 1, 060 bn and AGR liability of Rs 621.8 bn and Rs 234 bn from banks and other financial situations.
* On positive note, data usage per customer grew by 14.8℅ QoQ to 14.9 GB/ Month; it is mainly due to lockdown and not likely to sustain.
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