'Buy' maintained on Idea – TP Rs.120 - Geojit BNP Paribas Financial Services

- The stock is the top pick in the telecom space.

- The company has beaten estimates driven by strong performance across key metrics.

- 3QFY12 revenue increased 8.8% qoq aided by subscriber growth of 6.2% qoq, minutes of use (MOU) increase of 1.4% qoq and revenue per minute (RPM) increase of 1.4% qoq.

- EBITDA increased 13.3% with EBITDA margin improvement of 100 bps qoq.

Though a tariff hike is not expected in the near term, tariff hike effected in last May- June will aid ARPM improvement in the next two quarters.

- Idea is well positioned to benefit from an increase in voice penetration in the rural area in the medium term and data pick up will provide long term growth opportunity.

- The company will continue to grow faster than the industry with 27.2% growth in revenue and 41.8% growth in EBITDA.

- Data revenue increased from 13.2% to 13.7% aided by 3G, which contributes 1% revenue with ARPU of Rs.79 and subscriber base of 2.25 million.

-Retain 'buy' with a target price of Rs.120 over one year. Key strengths are strong subscriber base with increasing MOU and ARPM, margin improvement, further ARPM increase in the next two quarters as tariff cut is unlikely, further increase in non – voice contribution and significant room for rural penetration.

- Key negatives are industry over capacity, weak 3G take up till now and any adverse regulatory decisions.

Source : Equity Bulls

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