>Reliance Communications (Anand Rathi)

Reliance Communications

Growth Undervalued; Re-iterate Buy

# New TP of Rs260. We have trimmed our EBITDA estimates by
1.0-1.5% and raised medium-term capex forecasts by 10-15%. Our
revised DCF-based Dec ’09 TP is Rs260 vs. Rs275 (Sep ’09)
previously. At 6.0x FY10e EV/EBITDA, we believe RCOM is
attractively valued, given the 17% EBITDA CAGR over FY10e-12e.

# Revenue growth recovery imminent; margins to hold. We
forecast 24% wireless rev CAGR in FY09-11e vs. 15% in FY09e
led by GSM expansion. Despite the build-up of a huge operating
leverage (pre-booking of GSM network costs), we assume another
100-bp erosion in wireless EBITDA margin. Nonetheless, consol.
EBITDA margin should hold at ~40% (40.2% in 3Q) in our view.

To see full report: RELCOM