The company’s q-o-q numbers are not comparable due to hiving of retail business into a separate subsidiary VSNL Internet Services Limited (VISL), but on like-to-like basis numbers are below our estimates.
Net sales dipped by 18.5% y-o-y to Rs8.5 billion in Q4FY08. On a like-to-like basis, we estimate the sales to be flat q-o-q. The revenue growth has been stagnant on account of lower per minute realizations.
We expect the per-minute realizations to dip further on account of lower Access Deficit Charges (ADC), competitive intensity and significant ramp up in bandwidth capacity.
Adjusted PAT dipped by 64.4% y-o-y to Rs599 million on the back of lower realizations, higher operating cost due to restructuring of international subsidiaries, litigation cost, and higher interest charge.
The stock is currently trading at 27.6X on FY09E standalone earnings. We have downgraded our target price to Rs480 on the back of poor growth in the base business and on account of uncertainty in land bank realization (50% of estimated market value). We maintain our REDUCE recommendation on the stock.