Buy Reliance Communications With Target Of Rs 155 : FairWealth Securities

Buy  Reliance Communications With Target Of Rs 155 : FairWealth SecuritiesThe country's second biggest mobile network operator by subscribers, has moved up the ladder, in an all India bid for 3G spectrum and has won 13 circles including the metros of Delhi, Mumbai and Kolkata and is the only operator without capacity constraints on 2G in these circles. This advantage puts it in a unique position to offer an excellent 3G user experience.

Reliance Communications owns and operates the world's largest next generation IP enabled connectivity infrastructure, comprising over 277,000 kilometers of fibre optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region.

Reliance Communications the country's biggest integrated telecommunication service supplier and TELibrahma, a key provider of mobile solutions, Inked a deal solely to offer up video updates in addition to replays from the ICC World Cup cricket matches for all cricket buffs.

Valuations:

With the approval of Rs 8700cr loan by China Development Bank (CBD) which will lead to savings of Rs 500 crore annually in interest payouts and with the launch of new 3G services leading to the addition of more subscribers the company is expected to show healthy numbers for current and subsequent quarters. At the current price of Rs 103, stock is trading at 12.1x and 10.95x of our estimated FY11E and FY12E EPS of Rs 8.5 and Rs 9.4. We thus recommend ‘BUY’ with the target price Rs 155.