RELIANCE COMMUNICATION
 
  

 
 

SHARETIPSINFO >>Research Reports >> RELIANCE COMMUNICATION (09-02-2009)

 

LISTING
CMP
Rs 166
52 WEEK HIGH/LOW

Rs 704/Rs147

FACE VALUE
Rs 5
Market Cap.

Rs 33715 CRORE

PE

13

P/BV

1.82

DIV%

15

 

COMPANY OVERVIEW:
Reliance Communication formerly known as Reliance Infocomm is the part of Anil Dhirubhai Ambani Group. It is India’s leading integrated telecommunication company with over 60 million customers.
The business of the company encompasses a complete range of telecom services covering mobile and fixed line telephony. It includes broadband, national and international long distance services and data services along with an exhaustive range of value added services and application.


 VISION:
“We will leverage our strengths to execute complex global-scale projects to facilitate leading-edge information and communication services affordable to all individual consumers and businesses in India.
We will offer unparalleled value to create customer delight and enhance business productivity.
We will also generate value for our capabilities beyond Indian borders and enable millions of India's knowledge workers to deliver their services globally.”

GSM LAUNCH IN 14 CIRCLES: RCOM announced that it will launch its GSM services in 14 circles. RCOM GSM network will initially cover 11000 towns and 300000 villages. RCOM plans to increase its coverage to 24000 towns and 600000 villages by the mid of 2009. RCOM capex for Q2FY2009 was Rs47.7bn capex/sales of 85%. Capex is expected to further increase.


                   Source: company

KEY CONCERN:
Liability on outstanding FCCB increased by Rs5.4bn due to the depreciation of rupee. Company recently bought some FCCB from the market but that is very negligible compared to the total amount.
Capital expenditure is very high as compared to realization.
Likely tariff pressure due to new rollouts by competitors and implementation of Mobile Number Portability.
Pushback in rollout plans and pressure on operating profit margin post rollout.
Aggressive expansion.
Increasing finance cost.
Pressure on margin.


SHAREHOLDING PATTERN:

 

 

NO.OF SHARES

% OF TOTAL

PROMOTER

1364811060

 

66.12%

 

INSTITUTION

358673366

 

17.38%

 

GENERAL PUBLIC

340542455

 

16.50%

 

GRAND TOTAL

2064026881

 

100%

 

FINANCIAL:

 

 

31/03/07

% CHG

31/03/08

TOTAL INCOME

11761.91

14.15%

13426.65

EXPENDITURE

-7248.66

 

-8533.73

OPERATING INCOME

4513.25

8.41%

4892.92

DEPRECIATION

-1836.12

 

-1843.66

PBIT

 

2677.13

 

3049.26

INTEREST

 

-232.38

 

-445.17

PBT

 

2444.75

 

2604.09

TAX

 

-12

 

-17.64

PAT

 

2432.75

6.31%

2586.45


 HIGHLIGHTS:
TOTAL INCOME GREW BY 14.15%
OPERATING PROFIT GREW BY 8.41%
NET PROFIT GREW BY 6.31%

RATIO:        

 

 

31/03/07

31/03/08

 

EPS

11.7808717

12.52518

 

OPM

38.371744

36.44185

 

NPM

20.6832904

19.26355

INTEREST COVERAGE

11.5194923

6.849191


 HIGHLIGHTS:
EPS INCREASED BY 6.31%
OPM DECREASED BY 193 basis points.
NPM DECREASED BY 142 basis points.
INTEREST COVERAGE CAME DOWN FROM 11.51 TO 6.84.

COMPARISION OF Q3FY2009 WITH Q3FY2008:  

 

 

31/12/07

 

31/12/08

TOTAL INCOME

3410.82

-0.35%

3398.73

EXPENDITURE

-2343.78

 

-2466.74

OPERATING INCOME

1067.04

-12.60%

931.99

DEPRECIATION

-492.53

 

-617.81

PBIT

 

574.51

 

314.18

INTERSET

 

-135.73

 

-569.91

PBT

 

438.78

 

-255.73

TAX

 

-2.3

 

-3.9

EXTRA ORD INCOME

0

 

656.67

PAT

 

436.48

-9.03%

397.04


HIGHLIGHTS:
TOTAL INCOME DECREASED MARGINALLY BY 35 basis points.
OPERATING PROFIT DECREASED BY 12.6%.
NET PROFIT DECREASED BY 9.03%.

RATIO:

 

 

31/12/07

31/12/08

 

EPS

2.113705

1.922712

 

OPM

31.28397

27.42171

 

NPM

12.79692

11.68201

INTEREST COVERAGE

4.23056

0.55128


 HIGHLIGHTS:
EPS CAME DOWN BY 9.03%.
OPM CAME DOWN FROM 31.28% TO 27.42
NPM CAME DOWN FROM 12.79% TO 11.68%
INTEREST COVERAGE CAME DOWN DRASTICALLY FROM 4.32 TO 0.55.

VALUATION:
We expect the company EPS to grow at rate of 7% in FY2009 and FY2010. At CMP it is trading at 13.6X to past year earning. The valuation still looks very rich. PE to Growth ratio stands at 1.94.Even if we give the PE to Growth of 1.2 which is on higher side,the fair market value come at Rs96.


CONCLUSION:
We maintain Avoid or Sell rating on the counter. Investor should stay away from the counter.

 

 

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