>TULIP TELECOM (ICICI DIRECT)

Going strong…

Tulip Telecom reported its Q4FY09 consolidated results, which were in line with our estimates on the topline front. The topline at Rs 467.7 crore was 2.48% lower than our expectation of Rs 479.6 crore. The company recorded a growth of 12.8% and 5.9% YoY and QoQ, respectively. The EBITDA margin at 21.4% improved marginally by 52 bps YoY and by 156 bps QoQ. PAT for the quarter stood at Rs 106.7 crore, up 114.9% YoY and 60.9% QoQ, primarily aided by other income of Rs 57.9 crore.

Highlight of the quarter
The company has almost completed its fibre network roll out in Mumbai and Delhi. It is currently in the process of stabilising the network. The SWAN project for the West Bengal government is also on the verge of completion. We expect it to add to revenues from Q3FY10 onwards. Similar projects for Assam and MP are currently under implementation. The company repurchased and cancelled FCCBs of the face value US$33.39 million, according to the RBI circular, at a discount. This resulted in savings of Rs 730.3 million and was included in other income. It has decided a dividend payout of Rs 4/ share.

Valuations
The stock has appreciated over 187% over the past two months. At the CMP of Rs 848, it is trading at 10.5x and 9.4x its FY10E and FY11E diluted EPS respectively. We value the stock at 10.0x FY11E EPS to arrive at a target price of Rs 906. We are downgrading it the stock to HOLD from OUTPERFORMER.

To see full report: TULIP TELECOM