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MOSL: Morning India (14/January/20): 1. Telecom (Coming out of the woods!); 2. Consumer Electricals; 3. EcoScope (CPI); 4. Delta Corp

MOrning India (14/January/20):  1. Telecom (Coming out of the woods!); 2. Consumer Electricals; 3. EcoScope (CPI); 4. Delta Corp

 

Today’s top research idea

Telecom: Coming out of the woods!

• After a prolonged period of pain, the Indian telecom sector has got a fresh lease of life, thanks to (a) the recent unprecedented tariff hike, and (b) the government's efforts to revive profitability.
• We believe the recent tariff hikes is a beginning of trend reversal with more prise hike in 2020. The incremental price hike is a function of support for VIL and the needed profitability boost to RJio and Bharti.
• This could be a turning point for the industry, wherein incremental capital commitment would decline with players agreeing on better tariffs.
• The recent ~25% price hike should add INR293b/INR190b to the industry's overall revenue/EBITDA in FY21E - Bharti/VIL/RJio's EBITDA should reach INR394b/INR120b/INR419b, an increase of 14%/55%/30% from pre price hike.
• We estimated that VIL will need an additional ~35% ARPU increase in the next 12-18 months, in order to fund the annual cash requirement, assuming no material market share churn. This may provide incremental EBITDA upside of 36%/54% for Bharti/RJio.

Piping hot news

Inflation shock after GDP growth slump

• Retail inflation shot to a five-and-a-half-year high of 7.35% in December, breaching the central bank’s tolerance limit of 6% and confirming fears raised by some economists that India is entering a phase of slow growth and rising prices. December inflation was steeper than the 6.20% median estimate in a Reuters survey of economists and the fastest increase since July 2014.