On October 3, Uralsvyazinform released its 1H 2008 financials audited to IFRS.
The results posted produced a mixed impression. Revenue rose by just 5%, falling far short of our modest 10% projection. The company’s core cellular business, which accounted for 32% of the overall revenue, expanded by a modest 10%: the company cites stiffening competition in that segment of the market.
The company’s fixed-line telecoms division, which is in 2nd place among the company’s units in revenue terms and its leading segment by market share, contracted by 3%, which is surprising given the unchanged tariffs. The company has opted not to increase tariffs on its fixed-line phone calls this year. The operator cited the active transition to cheaper tariff plans by its customers as a reason for the downturn.
On the bright side, we point out a significant rise in the company’s profit margins, by 3%, to 36%, which almost fully coincided with our expectations for 2008. The net margin widened by 1%, which may be regarded as a neutral result. The indicator for a full-year net margin would be more objective, as it is not influenced by seasonal factors and the management’s performance.
URSI: IFRS financial indices for 1H 2008
| | 1H2007 | 1H2008 | 1H2008/1H2007 | 2008/2007 (projection) |
|---|
| Revenue | 18.978 | 20.019 | 5% | 10% |
| OIBDA | 6.317 | 7.185 | 14% | 16% |
| OIBDA margin | 33% | 36% | 3% | 36% |
| Net profit | 1.329 | 1.691 | 27% | 29% |
| Net margin | 7% | 8% | 1% | 11% |
Source: company data, Finam estimates
We leave our target price for the company unchanged, at USD 0.064 per common share and USD 0.036 per preferred share, which corresponds to a BUY recommendation on both types of shares.
0.569
0.073
