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Bharti Airtel -In line with estimates, save rebranding cost…
Bharti Airtel’s Q3FY11 numbers were in line with our estimates on the
topline front. The company reported a consolidated topline of | 15756.0
crore against our expectation of | 15826.5 crore, registering QoQ
growth of 3.6%. EBITDA declined 2.7% QoQ while margins contracted
by 204 bps to 31.6%. Bharti incurred one-time expense of | 339.5 crore
on a re-branding exercise. Adjusting for this, the margin would have
been at 33.8%. Consolidated PAT for the quarter was at | 1303.3 crore
(I-direct estimate of | 1580.0 crore) declining 21.5% QoQ due to one
time re-branding cost and higher interest cost of tax outgo.
ƒ Highlights of the quarter
ARPU for India stood at | 198, down from | 202, declining 2.0%
QoQ. The Indian subscriber base grew 6.4% sequentially. After a
seasonally weak quarter, the MoU declined 1.1% QoQ to 449
minutes while ARPM remain stable at 44.2 paisa. Traffic on network
grew 4.3% QoQ to 199 billion minutes. ARPU for African operations
was at $7.3, declining 0.8% QoQ. However, MoU improved by 7.4%
at 120, indicating higher elasticity in African markets. The company
incurred one-time re-branding cost of | 340 crore and has launched
the new brand in all the countries of its operation.
Valuation
Though the current performance is subdued, we are confident about the
fundamental strength of the business. The impact of the MNP launch,
uptake in 3G services and regulatory concerns in terms of additional
spectrum fees and new telecom policy remain key factors to watch out
for in the near term. At the CMP of | 323, the stock is trading at 19.5x
FY11E and 14.3x FY12E. Using the DCF methodology and assuming
revenue CAGR of 12.4% over FY11E–FY20E and terminal growth of 3.0%
thereon, we have arrived at a target price of | 370/share. We upgrade the
stock from ADD to BUY.
Outlook and valuations
The company reported topline growth in line with estimates both in Asian
and African operations. The margins, excluding one-time expense, have
been stable in the Indian operations and have shown an encouraging
trend in the African operations. The rate of fall in KPIs has been much
lower than the previous quarters.
Though the current performance is subdued, we are confident about the
fundamental strength of the business. The Indian operations continued to
exhibit leadership with robust results even though intense competition
persists. Once the African operations start contributing positively to PAT,
the stock may get re-rated.
The impact of MNP launch, uptake in 3G services and regulatory concerns
in terms of additional spectrum fees and new telecom policy would
remain key factors to watch out for in the near term.
At the CMP of | 323, the stock is trading at 19.5x FY11E and 14.3x FY12E.
Using the DCF methodology and assuming revenue CAGR of 12.4% over
FY11E–FY20E and terminal growth of 3.0% thereon, we have arrived at a
target price of | 370/share. We upgrade the stock from ADD to BUY.
Exhibit 11: DCF assumption
| in Crore
WACC 10.8%
Revenue CAGR over FY11E-20E 12.4%
Present Value of Cash Flow till FY20E 55,869.3
Terminal Growth 3.0%
Present Value of terminal cash flow 141,769.8
PV of firm 197,639.1
Less: Current Debt 57,161.8
Total present value of the Equity (excluding current cash) 140,477.3
Number of Equity Shares outstanding 379.6
Per Share Value (excluding current cash) 370.0
Add Current Cash Per Share 0.0
DCF - Target price (|) 370.0
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti Airtel -In line with estimates, save rebranding cost…
Bharti Airtel’s Q3FY11 numbers were in line with our estimates on the
topline front. The company reported a consolidated topline of | 15756.0
crore against our expectation of | 15826.5 crore, registering QoQ
growth of 3.6%. EBITDA declined 2.7% QoQ while margins contracted
by 204 bps to 31.6%. Bharti incurred one-time expense of | 339.5 crore
on a re-branding exercise. Adjusting for this, the margin would have
been at 33.8%. Consolidated PAT for the quarter was at | 1303.3 crore
(I-direct estimate of | 1580.0 crore) declining 21.5% QoQ due to one
time re-branding cost and higher interest cost of tax outgo.
ƒ Highlights of the quarter
ARPU for India stood at | 198, down from | 202, declining 2.0%
QoQ. The Indian subscriber base grew 6.4% sequentially. After a
seasonally weak quarter, the MoU declined 1.1% QoQ to 449
minutes while ARPM remain stable at 44.2 paisa. Traffic on network
grew 4.3% QoQ to 199 billion minutes. ARPU for African operations
was at $7.3, declining 0.8% QoQ. However, MoU improved by 7.4%
at 120, indicating higher elasticity in African markets. The company
incurred one-time re-branding cost of | 340 crore and has launched
the new brand in all the countries of its operation.
Valuation
Though the current performance is subdued, we are confident about the
fundamental strength of the business. The impact of the MNP launch,
uptake in 3G services and regulatory concerns in terms of additional
spectrum fees and new telecom policy remain key factors to watch out
for in the near term. At the CMP of | 323, the stock is trading at 19.5x
FY11E and 14.3x FY12E. Using the DCF methodology and assuming
revenue CAGR of 12.4% over FY11E–FY20E and terminal growth of 3.0%
thereon, we have arrived at a target price of | 370/share. We upgrade the
stock from ADD to BUY.
Outlook and valuations
The company reported topline growth in line with estimates both in Asian
and African operations. The margins, excluding one-time expense, have
been stable in the Indian operations and have shown an encouraging
trend in the African operations. The rate of fall in KPIs has been much
lower than the previous quarters.
Though the current performance is subdued, we are confident about the
fundamental strength of the business. The Indian operations continued to
exhibit leadership with robust results even though intense competition
persists. Once the African operations start contributing positively to PAT,
the stock may get re-rated.
The impact of MNP launch, uptake in 3G services and regulatory concerns
in terms of additional spectrum fees and new telecom policy would
remain key factors to watch out for in the near term.
At the CMP of | 323, the stock is trading at 19.5x FY11E and 14.3x FY12E.
Using the DCF methodology and assuming revenue CAGR of 12.4% over
FY11E–FY20E and terminal growth of 3.0% thereon, we have arrived at a
target price of | 370/share. We upgrade the stock from ADD to BUY.
Exhibit 11: DCF assumption
| in Crore
WACC 10.8%
Revenue CAGR over FY11E-20E 12.4%
Present Value of Cash Flow till FY20E 55,869.3
Terminal Growth 3.0%
Present Value of terminal cash flow 141,769.8
PV of firm 197,639.1
Less: Current Debt 57,161.8
Total present value of the Equity (excluding current cash) 140,477.3
Number of Equity Shares outstanding 379.6
Per Share Value (excluding current cash) 370.0
Add Current Cash Per Share 0.0
DCF - Target price (|) 370.0
Source: Company, ICICIdirect.com Research
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