Accumulate Reliance Comm; target of Rs 244: Angel Broking

Angel Broking has recommended an accumulate rating on Reliance Communication with a price target of Rs 244, in its report dated May 5, 2009.

“Going forward, we expect RCOM to post a 21.8% CAGR in Top-line over FY2009-11E, while Bottom-line is expected to record a CAGR of just 4.1% over the period. At the CMP, the stock is trading at a P/E of 8.7x FY2010E EPS, EV/EBITDA of 6.9x FY2010E EBITDA and at an EV/subscriber of USD 91.7 on our FY2010 subscriber estimates. While the company is expected to post strong growth in its subscriber base on account of its pan-India GSM launch, the quality of subscribers remains a concern.”

“We have factored in a 36.4% CAGR in mobile subscriber base going forward over FY2009-11E, while also modeling for a 12.5% compounded fall in ARPUs. Thus, the ARPU fall is expected to limit Top-line growth for the Wireless Business to 24.5% CAGR over Y2009-11E, which is decent, albeit considerably lower than the subscriber CAGR. We downgrade the stock from Buy to Accumulate, given the recent run-up in the stock price and have a Target Price of Rs 244, including Rs 212 for its core business (8x FY2010E EPS) and Rs 32 for the Towerco, Reliance Infratel, assuming 50% captive tenancy,” says Angel Broking’s report.

Tags: angel broking, brokerage recos, buy, Reliance Comm

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