Indiabulls Securities puts SELL on MTNL
Indiabulls Securities puts SELL on MTNL
Mahanagar Telephone Nigam Limited (MTNL) revenues and earnings continued to slide in the quarter.
The wireline customers decreased by 1.5% q-o-q to 3.75 million. Despite the bundling of services, the company is unable to stem the drop in ARPU and loss in subscribers.
Consequently, wireline revenue dropped 3.2% q-o-q to Rs7.6 million. Mobile revenue also fell by 3% q-o-q to Rs2.1 billion on account of sliding ARPUs. For pre-paid customers, ARPU slipped around 13%. Moreover, the subscriber addition grew only by 6.1% q-o-q, compared with the addition of ~10% q-o-q for the overall industry.
The EBITDA margin witnessed a downfall by substantial 500 bps q-o-q on account of a rise in staff cost post wage revision.
We continue to believe that the Company’s margins will drop around 15% for FY09 owing to a loss of high ARPU fixed-line business and growth in low ARPU mobile business. Besides, huge work force will continue to drag the margins southwards.
Based on our DCF valuation, we arrive at a target price of Rs86 for the stock and reiterate our SELL rating on the stock based on constant unsatisfactory operating performance.
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