Trading with PT style
- Thread starter praveen taneja
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■ The Indian telecom market may have broken into a phase of severe
price competition. The initial stage of this round of competition is likely to
be led by a significant decline in RPMs and margin compression, while the
endgame would be decided by regulatory flexibility.
■ Expect a 33-35% RPM decline and 600-720 bp erosion in mobile
EBITDA margins from FY3/09 through FY3/12. Despite their protests to the
contrary, the incumbent GSM players – Bharti, Vodafone and Idea – would be
sucked into a price war as they try to protect their market shares. The bestcase scenario is stabilisation by the end of 2010, but this is not certain.
■ Severe erosion in profitability should lead to EPS declines in FY3/11 for
all operators. While Bharti’s scale could allow it to retain a respectable ROE
of 18%-plus, RCOM’s and Idea’s should be sub-10%.
■ Despite a sharp share price correction in recent weeks, I believe the
risk-reward remains unfavourable. Negative news flow, weak earnings and
consensus downgrades could continue for the next six to 12 months.
Valuations do not provide support due to YoY declines in EPS and falling
ROEs. Stocks need to fall 15-20% below the target prices (30-40%
downside from current levels) before SM turn buyers. RCOM and Idea are
most vulnerable, while Bharti is also at significant risk due to its overweight
position in most portfolios.
price competition. The initial stage of this round of competition is likely to
be led by a significant decline in RPMs and margin compression, while the
endgame would be decided by regulatory flexibility.
■ Expect a 33-35% RPM decline and 600-720 bp erosion in mobile
EBITDA margins from FY3/09 through FY3/12. Despite their protests to the
contrary, the incumbent GSM players – Bharti, Vodafone and Idea – would be
sucked into a price war as they try to protect their market shares. The bestcase scenario is stabilisation by the end of 2010, but this is not certain.
■ Severe erosion in profitability should lead to EPS declines in FY3/11 for
all operators. While Bharti’s scale could allow it to retain a respectable ROE
of 18%-plus, RCOM’s and Idea’s should be sub-10%.
■ Despite a sharp share price correction in recent weeks, I believe the
risk-reward remains unfavourable. Negative news flow, weak earnings and
consensus downgrades could continue for the next six to 12 months.
Valuations do not provide support due to YoY declines in EPS and falling
ROEs. Stocks need to fall 15-20% below the target prices (30-40%
downside from current levels) before SM turn buyers. RCOM and Idea are
most vulnerable, while Bharti is also at significant risk due to its overweight
position in most portfolios.
Key factors that could determine market behavior include government policies (watch out for infrastructure spending), global markets (correlation with SPX and China is still high), crude oil prices (a sharp spike creates problems, the risks are lower if a crude oil price rise is accompanied by strong capital flows), long bond yields (reflecting fiscal position), the RBIs exit policy (and hence liquidity), sentiment indicators (watch market breadth and momentum, which suggests weak share prices in the offing), equity supply , and valuations (relative valuations have moved above average levels).
A farmer rears twenty-five young hens and one old cock. As he feels that the old cock could no longer handle his job efficiently, the farmer bought one young cock from the market.
Old cock to Young cock : "Welcome to join me, we will work together towards productivity.
Young cock : What you mean? As far as I know, you are old and should be retired.
Old cock : Young boy, there are twenty-five hens here, can't I help you with some?
Young cock : No! Not even one, all of them will be mine.
Old cock : In this case, I shall challenge you to a competition and if I win you shall allow me to have one hen and if I lose you will have all. Young cock : O.K. What kind of competition?
Old cock: 50 meter run. From here to that tree. But due to my age, I hope you allow me to start off the first 10 meters.
Young cock : No problem ! We will compete tomorrow morning.
Confidently, the following morning, the Young cock allows the Old cock to start off and when the Old cock crosses the 10 meters mark the Young cock chases him with all his might.
Soon enough, he was behind the Old cock back in a matter of seconds.
Suddenly, Bang! ...... before he could overtake the old cock, he was shot dead by the farmer, who cursed, "Hell ! This is the fifth GAY chicken I've bought this week !"
Old cock to Young cock : "Welcome to join me, we will work together towards productivity.
Young cock : What you mean? As far as I know, you are old and should be retired.
Old cock : Young boy, there are twenty-five hens here, can't I help you with some?
Young cock : No! Not even one, all of them will be mine.
Old cock : In this case, I shall challenge you to a competition and if I win you shall allow me to have one hen and if I lose you will have all. Young cock : O.K. What kind of competition?
Old cock: 50 meter run. From here to that tree. But due to my age, I hope you allow me to start off the first 10 meters.
Young cock : No problem ! We will compete tomorrow morning.
Confidently, the following morning, the Young cock allows the Old cock to start off and when the Old cock crosses the 10 meters mark the Young cock chases him with all his might.
Soon enough, he was behind the Old cock back in a matter of seconds.
Suddenly, Bang! ...... before he could overtake the old cock, he was shot dead by the farmer, who cursed, "Hell ! This is the fifth GAY chicken I've bought this week !"
Hi bro welcome back:thumb:
ya know from ur post Bichhude sabhi baari baari
my trade are as usual three step ahead two behind still going on as one step is ahead going my strategy is always take out profit so even if there is loss i m in profit u wont believe i lost 6lac in last two year and taken out approx 4lac still have portfolio of approx 30k invested 3k in 1991 3rd jan:thumb:
so all i know is Badaa wo hi jo de Raam badhai
I saw many ups and down of mkt made two shops one home n still my many friends says if u want to earn pump some money in mkt:rofl:
Jit jit pair pade santan ke tahan tahan beda paar:lol:
ya know from ur post Bichhude sabhi baari baari
my trade are as usual three step ahead two behind still going on as one step is ahead going my strategy is always take out profit so even if there is loss i m in profit u wont believe i lost 6lac in last two year and taken out approx 4lac still have portfolio of approx 30k invested 3k in 1991 3rd jan:thumb:
so all i know is Badaa wo hi jo de Raam badhai
I saw many ups and down of mkt made two shops one home n still my many friends says if u want to earn pump some money in mkt:rofl:
Jit jit pair pade santan ke tahan tahan beda paar:lol:
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