MOSL: Morning India (21/August/17)- 1. EcoScope 2. Infosys 3. Idea Cellular 4. Healthcare
​MOrning India (21/August/17): 1. EcoScope; 2. Infosys; 3. Idea Cellular; 4. Healthcare
Today’s top research idea
Idea Cellular - Merger to conclude sooner than anticipated
Risk of market share dilution reduced; synergies not fully factored
Vodafone-Idea merger is likely to conclude by FY18, reducing the risk of market share dilution.
Our channel checks with network vendors indicate that the master rollout plans, including network restructuring and fresh investments, should kick off soon. We expect the combined entity’s margin to expand from 23-25% currently to 32%/36% by FY20/21 (lower than Bharti’s India wireless 40% margin in FY16-17).
We expect a revenue recovery from 3QFY18, by when ARPU downtrading should be largely complete and GST impact/seasonal weakness largely behind. RJio’s VoLTE feature phone launch at current pricing is unlikely to be disruptive. However, IUC reduction remains a key risk to ARPU stability.
Merged entity’s workings imply current EV/EBITDA of 8x (FY19E). Potential synergy gains could imply EV/EBITDA of 6.2x/5.2x by FY20/FY21E. Maintain Buy with a TP of INR110.
Piping hot news
Infosys approves Rs13,000 crore share buyback at 24.57% premium
Infosys board has announced buyback of shares worth Rs13,000 crore after the stock went through a sharp correction on Friday on chief executive officer and managing director Vishal Sikka's surprise resignation.
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