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  • 25 Jul 2022
  • ICICIdirect Research

RJIO’S OPERATING PERFORMANCE WAS BETTER THAN EXPECTED

RELIANCE - 1284 Change: -21.90 (-1.68 %)

News: JIO: Post sim consolidation led three consecutive quarter of net subscriber decline, the company added 9.7 million (mn) subs (more than expectations of 6 mn). The positive surprise was also on higher ARPU growth which led to modest beat at topline and EBITDA levels. The ARPU saw a growth of 4.8% QoQ at Rs 175.7 (our expectations Rs 174), driven by residual pass through of tariff hike undertaken in December, 2021 and subscriber mix (higher data usage driven ARPU upgrades). The revenues and EBITDA stood at Rs 20873 crore /Rs 10964 crore up by 4.7%/4.3% QoQ, respectively. The margins stood at 50.1%, down 16 bps QoQ and tad higher than our estimates of 50.1%, owing to higher topline. The PAT at Rs 4335 crore, up 3.9% QoQ, was tad lower than expected (our expectations Rs 4420 crore), owing to higher than anticipated depreciation.

Views: We believe that sim consolidation is largely done. The improving subscriber mix is also a key positive driver of ARPU. We have marginally tweaked the earnings estimates and we remain constructive on the company. We also await the spectrum auction to gauge how superior is company positioning itself vs. peers in terms of 5G spectrum holdings. We continue to believe that Jio’s digital ecosystem lends it a competitive advantage in the overall communication space, thereby providing superior legs of growth and valuation pegging.

Impact: Positive