Achiievers Research – Reliance Communication Ltd

Research Report on Reliance Communication Ltd

Fundamental Call

CMP

TP

SL

Return

Duration

127

157

113

~24%

12 months

 

RCOM continues to consolidate its position as India’s leading data service provider and is having a wireless subscriber base of 110.9 mn as of March 31, 2014.

Wireless data market ‘the next growth driver’ – We believe the company will see an improvement in RPM over the next few quarters, following RCOM’s move to reduce free and discounted minutes by increasing tariffs by upto 20% for all of its pre-paid customers.

Improved performance – RCOM’s revenue grew marginally in Q4FY14 backed by better revenue from international operations. EBITDA margin declined by 166bps QoQ to 29.3% in Q4FY14, led by higher other expenses and employee cost.

Valuation and view At a current market price (CMP) of Rs.127, the stock trades at a P/E of ~21x FY16E, earnings. We recommend ‘BUY’ with a target price of Rs. 157, which implies potential upside of ~24% to the CMP from 1 year perspective.

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