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EARNINGS REVIEW
Bharti Airtel (BRTI.BO)
Buy Equity Research
In line with expectations: Steady India; Africa KPIs better than est.
What surprised us
Bharti reported 3QFY11 net revenues and normalized EBITDA (adjusted for
one-off branding cost of Rs3.4 bn) that were largely inline with our and
consensus estimates. Although reported net profit at Rs13.0 bn was down
21.5% qoq, adjusted for one-off branding the net profit came in at Rs16.4
bn vs. consensus estimate of Rs16.1 bn. Key positives: 1) MOU/sub in
Africa was up 7% qoq indicating improving positive elasticity. EBITDA
margin at 25.0% was up 110bps qoq and 220bps above our estimates. 2)
Bharti prepaid a debt of Rs20.7 bn in 3Q, indicating the company is looking
to deleverage. 3) Tax rate at 21.7% was down 7 ppt qoq and 26% lower
than our estimates and largely offset the higher interest expense. Key
negatives: 1) Bharti’s India ARPU/MOU was down 2.0%/1.1% qoq versus
Idea ARPU/MOU being up 0.6%/1.8% respectively. 2) Net interest expense
at Rs7.5bn increased 28.5% qoq and was 34.6% above our estimates
despite a reduction in net debt. 3) Overall capex was up 30% qoq
(capex/sales: 27%), largely lead by increase in Africa capex (262% qoq at
Rs13.6 bn; capex/sales of 34%).
What to do with the stock
We reiterate our Buy rating (on Conviction List) on Bharti as we believe it
is well positioned to benefit from the improving regulatory environment
and diminishing competitive intensity. We believe the results indicate
steady cellular business and will likely relieve some concerns on Africa
turnaround. Our 12-month SOTP-based target price is Rs430. Risks: 1)
weaker-than-expected Africa operations; and 2) greater competition.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Bharti Airtel (BRTI.BO)
Buy Equity Research
In line with expectations: Steady India; Africa KPIs better than est.
What surprised us
Bharti reported 3QFY11 net revenues and normalized EBITDA (adjusted for
one-off branding cost of Rs3.4 bn) that were largely inline with our and
consensus estimates. Although reported net profit at Rs13.0 bn was down
21.5% qoq, adjusted for one-off branding the net profit came in at Rs16.4
bn vs. consensus estimate of Rs16.1 bn. Key positives: 1) MOU/sub in
Africa was up 7% qoq indicating improving positive elasticity. EBITDA
margin at 25.0% was up 110bps qoq and 220bps above our estimates. 2)
Bharti prepaid a debt of Rs20.7 bn in 3Q, indicating the company is looking
to deleverage. 3) Tax rate at 21.7% was down 7 ppt qoq and 26% lower
than our estimates and largely offset the higher interest expense. Key
negatives: 1) Bharti’s India ARPU/MOU was down 2.0%/1.1% qoq versus
Idea ARPU/MOU being up 0.6%/1.8% respectively. 2) Net interest expense
at Rs7.5bn increased 28.5% qoq and was 34.6% above our estimates
despite a reduction in net debt. 3) Overall capex was up 30% qoq
(capex/sales: 27%), largely lead by increase in Africa capex (262% qoq at
Rs13.6 bn; capex/sales of 34%).
What to do with the stock
We reiterate our Buy rating (on Conviction List) on Bharti as we believe it
is well positioned to benefit from the improving regulatory environment
and diminishing competitive intensity. We believe the results indicate
steady cellular business and will likely relieve some concerns on Africa
turnaround. Our 12-month SOTP-based target price is Rs430. Risks: 1)
weaker-than-expected Africa operations; and 2) greater competition.
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