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Techno Funda Pick

April 6, 2015

Idea Cellular (IDECEL) CMP- | 191.00

Time frame: 6 months


Key Technical Data
Recommended Price

186-191

Price Target

240.00

Stoploss

169.00

52 Week High

193.05

52 Week Low

129.15

50 days EMA

166.00

200 days EMA

157.00

52 Week EMA

158.00

*Recommendation given on i-click to gain on April 06, 2015


at 09:35 hrs

Stock price movement vs. BSE Small cap


200
190
180
170
160
150
140
130
120

9,400
8,900
8,400
7,900
7,400
6,900

Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15

6,400

Idea Cellular

100%

26%
-8%

-60%
2010

2011

2012
Year

2013

Stop loss: | 168.00

Key technical observations


The share price of Idea Cellular has emerged out of its one and a half year hibernation phase by scaling new lifetime highs, thereby signalling the end of the elongated corrective phase and resumption of the larger degree
uptrend. We believe the stock is set to embark upon its next directional up move and, thus, provides a good entry
point for medium-term players to ride the expected price rally from hereon
The stock witnessed a stellar run up from its 2012 low of | 63 and rallied to a life-time high of | 188 towards
October 2013. After amassing nearly two-fold gains, it went into hibernation mode to work off the excesses of the
preceding rally. The initial price correction halted precisely at the 50% retracement of the 2012-13 rally at | 125.
Thereafter, the stock witnessed a basing formation for over five months between February and July 2014 before
witnessing a gradual recovery towards the second half of 2014
Significantly, the share price underwent an elongated correction over several months while digesting various
uncertainties related with spectrum albeit holding key long term supports (| 130). More recently, as the spectrum
auction drew to a conclusion, the share price posted faster retracement of last falling segment by overhauling six
month decline (| 178-143) in just a week, which highlights a sentimental turnaround as strong investor interest is
coming back into the stock

We expect the stock to rally towards | 240 over the medium-term being the depth of the rounding pattern (188130=58 points) as projected from the historical highs of | 188 (188+58=| 246)

65%
20% 18%

Target: | 240.00

The renewed appetite to own the stock even at historical highs has anchored declines over the past couple of
weeks and eventually launched the share price in a higher orbit. Volumes doubled their 50-week average (3 crore
shares) over the past three weeks underscoring the growing appetite to own the stock

BSE100

Price performance over last five years

20%

Buying range: | 186.00-191.00

Among oscillators, the weekly MACD indicator that flattened above the signal line (reading of 0) is seen diverging
from its nine week average signalling a strong undercurrent in the share price from a medium-term perspective,
thus validating the positive trend in price

2014

ICICI Securities Ltd. | Retail Equity Research

Exhibit 1: Idea Cellular Weekly Bar Chart

The share price is seen concluding five quarter rounding consolidation pattern
signalling next medium term up leg
Pattern implication suggests the price target of 240 over medium term

188

Research Analyst
Dharmesh Shah
dharmesh.shah@icicisecurities.com

Pattern implication @ 240

23.6% retracement @ 160

Karan Mittal
Karan.mittal@icicisecurities.com

Faster retracement of
last falling segment

50% retracement @ 125

63

Basing pattern at
key supports

The renewed appetite to own the stock is evident from the rising
volumes which doubled 50-week average

MACD diverging from its 9 week average highlights the underlying momentum in the stock

Source: Bloomberg, ICICIdirect.com Research

ICICI Securities Ltd. | Retail Equity Research

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Fundamental view

Stock Data
Particular
Market Capitalization (| Crore)
Total Debt (FY14) (| Crore)
Cash and Investments (FY14) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value
DII holding (%)
FII holding (%)

Amount
69,629.2
18,775.6
188.1
88,216.7
194 / 126
3,597.5
| 10
4.4
24.3

Exhibit 1: Key metrics


P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

FY14
32.7
36.3
10.6
3.9
11.9
10.8

FY15E
22.5
25.0
10.3
3.0
13.3
8.4

FY16E
19.7
21.9
8.3
2.6
13.3
10.5

FY17E
16.0
17.7
7.0
2.3
14.1
12.4

FY16E
36,045
12,771
3,533
9.8

FY17E
38,771
14,017
4,364
12.1

Exhibit 2: Financial highlights


| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY14
26,519
8,334
1,968
5.9

FY15E
31,654
10,707
3,095
8.6

Source: Company, ICICIdirect.com Research

Idea cellular is the third largest telecom operator and has exhibited higher than industry subscriber and revenue
growth over the past few years. Subscribers have grown at 33.5% CAGR (FY08-14) while revenue has grown at
25.7% CAGR over the same period. Also, its subscriber and revenue market share have increased from 11% and
9.6% in FY08 to ~18.1% and 17.2%, respectively. Also, Idea has been able to garner highest share in net adds with
a net adds market share of 28.7%. Going ahead, we expect subscriber growth to remain higher than industry at
7.9% CAGR over FY14-17E to reach 171 million subscribers.
After years of bleeding ARPM, a decline from 53 paisa in 2011 to 41 paisa in FY13, telcos are finally able to take
price hikes. With several new operators scaling down operations, telcos have been able to curb discounted minutes
at a rapid pace. ARPMs have expanded from a low of 41 paisa in Q4FY13, to 46.3 paisa in Q3FY15. This has also
been aided by increasing data usage, which has increased from 11.4 billion MB in Q4FY13 to 46.0 billion MB in
Q3FY15 while revenue from data offerings has increased from | 393 crore to 1247 crore in the same period. Led by
higher data usage and sustained price hikes, we expect the ARPM to expand to 50.3 paisa by FY17E. The company
has been able to pass on price hikes effectively as visible from increasing MoUs. Going ahead, with the expansion
in the voice ARPMs we expect voice volumes to grow at a decent rate of 8.7% over FY14-17E to 756.2 billion
minutes.
Data revenue has grown at an exponential rate of 88% in FY14 reaching | 2325.2 crore from | 1234.0 crore a year
ago. With the increased penetration of smart phones, data subscribers for Idea rose from 2.6 crore in FY13 forming
21.6% of the total subscribers. We expect it to reach 5.3 crore in FY16 forming 30.8% of the total subscribers. The
data usage per subscriber has also risen from 148 MB in FY13 to 270 MB in FY14, hence reaching 793 billion MB
data traffic by FY14. Recently, Idea has invested about | 41000 crore to augment its spectrum portfolio. The
company has been able to buy back sufficient spectrum in all its expiring circles, which remained a major concern
before auctions. The expiring circles had over 70% contribution to overall revenues. Hence, the positive emanating
from the winning back of spectrum outweighs the more than expected payout concern
Although the spectrum related payout will increase the debt burden by about | 14016.8 crore and, hence, lead to
an additional interest cost burden and depreciation cost causing a PAT dilution of about 8%, it would be offset by
imminent price hikes. In addition, its ability to now corner the upcoming data boom would improve the revenue
profile of the company. Moreover, the overhang of spectrum expiry has passed, which should aid investor
sentiments. We arrive at a revised target price of | 215 valuing it on a DCF methodology with revised revenue
assumptions.

ICICI Securities Ltd. | Retail Equity Research

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NOTES:

It is recommended to enter in a staggered manner within the prescribed range provided in the report

Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report on
closing basis

The recommendations are valid for three to six months and in case we intend to carry forward the position,
it will be communicated through separate mail.

Trading Portfolio allocation

It is recommended to spread out the trading corpus in a proportionate manner between the various
technical research products

Please avoid allocating the entire trading corpus to a single stock or a single product segment

Within each product segment it is advisable to allocate equal amount to each recommendation

For example: The Daily Calls product carries 3 to 4 intraday recommendations. It is advisable to allocate
equal amount to each recommendation

ICICI Securities Ltd. | Retail Equity Research

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Recommended product wise trading portfolio allocation

Products

Allocations
Product wise
Max allocation
allocation
in 1 stock

Return Objective
Number of Calls

Frontline Stocks

Mid-cap stocks

Duration

Daily Calls

8%

2-3%

3-4 Stocks

0.50-1%

2-3%

Intraday

Short term Delivery

6%

3-5%

7-10 p.m

4-5%

7-10%

Opportunity based

Weekly Calls

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Weekly Technical

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Monthly Call

15%

5%

2-3 Stocks

7-10%

10-15%

1 Month

Monthly Technical

15%

2-4%

5-8 Stocks

7-10%

10-15%

1 Month

Techno Funda

15%

5-10%

1-2 Stocks

10% and above

15% and above

6 Months

Technical Breakout

15%

5-10%

1-2 Stocks

10% and above

15% and above

3-6 Months

Cash in Hand

10%

100%

ICICI Securities Ltd. | Retail Equity Research

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Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,


ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd. | Retail Equity Research

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Disclaimer
ANALYST CERTIFICATION
We /I, Dharmesh Shah, Karan Mittal Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & conditions and other disclosures:


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