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Tulip Telecom LTD: Results In-Line, Retain BUY
Tulip Telecom LTD: Results In-Line, Retain BUY
Tulip Telecom LTD: Results In-Line, Retain BUY
June 1, 2010
BUY
Price Rs 941 Sensex Target Price Rs 1,240 16,945
Tulip Telecom reported Q4FY10 results in line with estimates. Net sales increased by 14.9% YoY to Rs 5.3bn (v/s estimate of Rs5.5bn). EBIDTA increased by 56% YoY to Rs 1.55bn (v/s estimate of Rs1.6bn). Higher contribution from data connectivity business along with economies led to 768 bps YoY improvement in EBIDTA margin to 29.1%. APAT increased by 73.4% YoY to Rs 795 mn (v/s estimate of Rs826mn). While the revision in depreciation policy to adjust the useful life of fiber assets reduced the depreciation for the quarter, the tax rate of 37% to factor the higher tax impact for full year (towards completion of first 5 years of 80 I (A)) benefit impacted the profits. During the quarter, Tulip transferred its SWAN projects with aggregate investment of Rs 2.3bn into an SPV at book value and has received Rs1.4bn as upfront cash consideration, while the balance would be received on receipt of payments by the SPV. Post transfer of SWAN projects, Tulip owns 10% stake in the SPV, and the risk of cost over-run gets transferred to the SPV. We believe that this move of hiving off the non-accretive SWAN projects is largely neutral for the company as it reduces Tulips ownership from 100% to 10% but also transfers risk of payment default, cost over-run, project delays, etc. to the SPV. Post the in-line Q4FY10 results, we retain our revenue and EBIDTA estimates but revise our depreciation and tax assumptions to factor change in depreciation policy and higher tax provision of 24% resulting in increased EPS of ~5% each for FY11E and FY12E. Our revised EPS estimates of Rs110.0 and Rs133.8 implies attractive valuations 8.6x and 7x for FY11E and FY12E respectively. We maintain BUY rating on the stock with DCF based target price of Rs 1,240.
Price Performance
(%)
1M 12 16
3M 1 (3)
6M 12M 1 1 38 19
Stock Details
Sector Reuters Bloomberg Equity Capital (Rs mn) Face Value(Rs) No of shares o/s (mn) 52 Week H/L Market Cap (Rs bn/USD mn) Daily Avg Volume (No of sh) Daily Avg Turnover (US$mn)
Tulip has transferred its SWAN projects at book value of Rs2.3bn to an SPV in which it holds 10% stake, in return for upfront cash consideration of Rs1.4bn and balance (difference between book value and cash received) to be received on receipt by SPV. With the receipt of Rs1.4bn cash, its net debt reduced to Rs8.4bn in Mar-10 v/s Rs11.0bn in Dec-09.
YE-Mar Sumit Modi sumit.modi@emkayglobal.com +91 22 6612 288 Abhishek Gaoshinde abhishek.gaoshinde@emkayglobal.com 91 22 6612 278 FY2009 FY2010 FY2011E FY2012E
Result Update
Result Update
Tulip has revised its depreciation policy from an aggressive 10-11% straight line method to ~9.3% due to lower depreciation on fiber assets which have longer useful life. Tulip has also adjusted for lower depreciation on fiber assets for FY10 in Q4FY10 that has resulted in lower depreciation of Rs155mn v/s ~Rs409mn in Q3FY10. Hence we have realigned our estimates for change in the policy resulting in deprecation expense lowering by 17.8% to Rs 1.6 bn and 17.5% to Rs 1.9bn for FY11E and FY12E respectively.
Emkay Research
1 June 2010
Result Update
YoY % chg 22% 12% 16% 25% 13% 56% 226% 32% 55% 28% 36% 29% 173% 10%
10%
% of sales Raw mat exp Employee exp Other exp EBIDTA EBIT PAT ETR 71.4 4.3 2.8 21.5 18.5 22.9 18.0 68.6 4.2 2.7 24.5 16.6 16.9 11.3 67.4 4.2 2.5 25.9 17.0 10.6 24.0 66.0 4.0 2.9 27.0 18.8 13.7 20.0 62.2 4.2 4.5 29.1 26.2 15.0 37.0
YoY bps chg (919) (14) 165 768 771 (791) 1,897 65.9 4.2 3.2 26.7 19.8 14.0 24.6 71.6 4.4 3.1 20.9 18.3 15.5 11.6
Emkay Research
1 June 2010
Result Update
19,440 4,037 15,403 1,450 1,336 4,007 2,273 534 8,150 1,336 6,814 4 23673
21,940 5,961 15,979 1,450 1,559 4,677 4,536 624 11,395 1,559 9,837 4 27271
Cash Flow Statement FY09 PBT Depreciation Tax Change in WC Others CFO (Inc)/Dec in fixed assets Others CFI Inc/(Dec) in Equity Net Borrowings Dividend paid others CFF Inc/(Dec) in cash Cash beginning Cash ending 2,286 (136) (3,812) (1,661) (2,468) 5,938 3470 662 (271) (716) (325) (23) 3,470 3447 2,835 414 (1) (165) (78) 3,005 (7,365) 3,553 (3,812) (3,181) (4,500) 4,463 (5,302) (308) (615) (1,762) (1,174) 3,447 2273 (500) (308) (602) (1,410) 2,263 2,273 4536 (2,500) FY10 3,654 1,353 (899) (1,340) 716 3,483 (3,181) FY11E 4,767 1,622 (1,146) (770) 615 5,088 (4,500) FY12E 5,798 1,924 (1,392) (759) 602 6,173 (2,500)
Ratios FY09 EBIT % NPM % ROCE % ROE % ROIC % EPS Cash EPS Book Value Debtors days Creditors days Working capital TO % Total Debt: Equity Fixed Asset TO PE (x) Cash PE (x) P/BV (x) EV/Sales (x) EV/EBITDA Dividend yield % 18.3 15.5 18.8 44.4 26.8 86.4 100.5 235.1 73 64 36.6 1.6 2.3 10.9 9.4 4.0 2.2 10.4 0.43 FY10 19.8 14.0 19.9 34.2 24.1 95.0 141.6 320.8 60 25 36.7 1.3 1.6 9.9 6.6 2.9 1.8 6.8 0.85 FY11E 21.2 14.9 23.1 27.5 26.4 110.0 159.2 518.7 60 20 28.0 0.4 1.4 8.6 5.9 1.8 1.4 5.2 0.85 FY12E 21.8 15.5 24.4 23.0 28.2 133.8 192.3 643.2 60 20 34.6 0.3 1.4 7.0 4.9 1.5 1.1 4.0 0.85
Emkay Research
1 June 2010
Result Update
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Emkay Research
1 June 2010