Religare Institutional Research has maintained 'Sell' on Idea Cellular with target price of Rs 135 in its report.

Commenting on the investment rationale, the stock broker said, "Idea's Q1 revenues grew 7.3% QoQ, ahead of estimates (RCMLe: 3.6%), with 3.2 million subscribers addition and 4.6% ARPU improvement QoQ to Rs 181. MOUs improved 1% QoQ to 401 minutes and voice realization increased 2% QoQ to 37.1p/min. The solid 24% data revenue growth was driven by 19% higher volumes and 4% higher realisation. EBITDA margins expanded by 154bps QoQ to 33.2% on 2% QoQ decline in SG&A expenses. PAT at Rs 7.3 billion (+57% YoY) was ahead of estimates (due to financial leverage.

With the capital raised in QIP, Idea’s net debt has declined to Rs 140 billion from Rs 192 billion in Q4FY14, implying 1.6x net-debt/EBITDA (FY15) multiple. However, we believe that Idea will have to continue to invest in its network and in acquiring spectrum assets, to build infrastructure to support data revenue and to remain competitive in emerging geographies. In Q1FY15, revenue growth from new circles was strong (+8.3% QoQ) while the EBITDA losses from new circles increased 2% QoQ to Rs1.7 billion.

While Idea continues to execute better than peers, we maintain that strong data growth will need more investments. We raise our FY15/FY16 revenue estimates by 2.9%/1.9% and EBITDA estimates by 7.5%/7.9% to factor in Q1 outperformance. We believe that valuations at 7.5x FY15E EV/EBITDA are full given margin/earnings expectations."

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