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Motilal Oswal Report
Reliance Jio 20% tariff hikes create sustenance of industry tariff hikes taken by peers – Bharti Airtel Ltd. and Vodafone Idea Ltd.
RJio holds risk of downtrading to lower price plans as even its data heavy one gigabite/day price plans at 20-25% below other plans.
This is unlike Bharti Airtel/Vodafone Idea which has limited risk of downtrading due to the structure of the price plans.
This should derive 27% Ebitda upside on 65% incremental Ebitda margin thus building 26% Ebitda compound annual growth rate over FY21-24E.
But the expectation of aggressive subscriber adds (due to Jiophone phone launch) may taper partly offsetting the gain.
The current rich valuation of 20 times enterprise value/Ebitda multiple of RJio partly factors the tariff hike.
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