Maintain ‘buy’ with revised SOTP-based TP of `90 (earlier `97), based on ~5x FY18E EV/E, regulatory payouts (include deferred payments and one-time outgo). Our TP implies 91% upside from CMP of `47. The stock trades at 11x /9x FY17E/FY18E EPS of ~ `4.1/`5.3.We build in 8% CAGR in consolidated revenue over FY16-18, driven by data revenue growth. We expect FY18 consolidated EBITDA margin to improve to ~37% (FY16: ~34%) on increasing data growth and moderation in voice competition.
RCOM’s India revenue (79% of revenue) grew ~12% QoQ, led by 22% QoQ growth in non-voice revenue. Data volume growth was muted at 1.5% QoQ on the back of 5% QoQ growth in 3G data subscribers. The spike in growth was due to one-time fiber optic sale. Voice revenue was flat QoQ at `33 bn. Globalcom’s revenue (21% of revenue) was up 12% QoQ with EBITDA margin at 16% (down 60 bps QoQ).
Deleveraging: Deal for stake sale in tower assets is expected to be complete after the closure of Aircel merger in June 2016. RCOM also recorded `2.2 bn in sale of property. Cash flow from these initiatives will be used to pay down debt (net debt of ~`413 bn). Management expects the MTS deal to be integrated in August 2016 (final court hearing in July 2016). Consol EBITDA at `19.6 bn (up 8.7% QoQ) was impacted by higher access costs at 19% of revenue in Q4 vs. 17% in Q3FY16.