UBS: Bharti Airtel Ltd. High quality GARP Stock

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UBS Investment Research
Bharti Airtel Ltd. 
High quality GARP Stock 
„ Bharti ticks most boxes for GEM investors
We believe Bharti stock offers excellent potential to generate alpha in 2011 - high
quality management team, resumption of growth, reasonable valuations, catalysts
in the form of improving regulatory and competitive dynamics. We urge GEM
investors to consider Bharti as a core holding.

„ What is changing? Rational regulation & Pricing
1. India will usher in new mobile regulations via the National Telecom Policy 2011
that will lay the foundation for a transparent and fair regulatory regime. 2. Pricing
for mobile services are showing signs of stabilization. We believe mobile pricing
can start trending up coinciding with potential consolidation in the industry. Bharti
with a 31.6% revenue market share will emerge as one of the biggest beneficiaries.

„ Africa could be a medium term positive
We believe the street and the investor community are likely to get more positive on
Bharti's Africa prospects in the coming quarters. We are confident that Bharti
management has the potential to generate value in the medium to long term in the
Africa business through capex and opex efficiency.

„ Valuation: Bharti is our top pick in the Indian mobile sector
We reiterate our Buy rating on Bharti and raise our SoTP  based Price target to
Rs500 (from Rs415 earlier). Our price target revision is based on a marginally
lower WACC of 11% (from 11.3% earlier) and an increase in our estimates. We
expect FY11-14 EPS CAGR of 33.5% for Bharti. We increase our FY12E/13E
EPS by 22% and 8% to 21.81/32.15. Triggers of improving regulatory climate and

better pricing power are likely to lead to re-rating in 2011.