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.
