Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti's 3QFY11 PAT declined 41% YoY and 22% QoQ to Rs13b (estimate of Rs17b) led by brand re-launch expenses
of Rs3.4b and forex loss of Rs1.5b. Consolidated revenue of Rs157.6 b (up 53% YoY and 3.6% QoQ) and EBITDA
(before brand re-launch exp) of Rs53.2b were broadly in line (1% below estimate). While traffic growth in India
operations was slightly below expectations, positives include strong revenue traction in Africa and continued stability
in India RPM/Africa margins.
3QFY11 Result highlights: Traffic growth for India mobile business at 4.5% QoQ, lower than our estimate of 6.3%
growth. RPM decline of only 0.8% QoQ (lowest in the past eight quarters) to Rs0.44, better than our estimate of 2%
decline. Continued positive elasticity and revenue momentum in Africa business with traffic up 16.6% QoQ, MOU per
subscriber up 7.1% QoQ and revenue up 8.7% QoQ. Flat QoQ margin for Africa (including Africa corporate expenses
but excluding brand launch expenses) at 23.3%, in line with our estimate. All outsourcing contracts (Network, IT,
BPO) have been closed in Africa; employee transition has started. Brand re-launch expenses of Rs3.4b and forex
loss of Rs1.5b at the consolidated level, both not included in our estimates.India capex guidance (ex-towers) remains
at US$1.8-2b in FY11 (9M capex at ~US$1.3b); capex for Africa to remain at US$800m/year. Net debt flat QoQ at
Rs599b.
FY12/13 estimates largely unchanged; 22% EBITDA CAGR over FY11E-13E; Buy: While we have downgraded
FY11 EBITDA and PAT estimates by 3-5% to factor-in forex loss and brand launch expenses, our FY12/13 estimates
remain largely unchanged. We remain positive given 1) strong traffic growth outlook despite stabilizing RPM, 2)
traction in non-voice business post 3G launch, 3) improving regulatory environment, and 4) initial signs of elasticity in
Africa. We expect 22% EBITDA CAGR and 30% PAT CAGR over FY11E-13E driven by normalized growth in India
business and margin inflection in Africa business. At CMP of Rs323, the stock trades at proportionate EV/EBITDA of
7x FY12E and 5.6x FY13E. Maintain Buy with a target price of Rs410, 27% upside.
India and South Asia revenue and adj. EBITDA up 3.5% QoQ
India and South Asia revenue grew 3.4% QoQ and 13.7% YoY to Rs117.2b (vs estimate
of 4% growth).
EBITDA (before re-branding) grew 3.6% QoQ and 7.2% YoY to Rs43.7b (vs estimate
of 5% growth).
EBITDA margin declined 229bp YoY but remained flat QoQ to 37.3%.
Net income of Rs18.3b was 7.8% below our estimate of Rs19.8b due to brand relaunch
expenses of Rs1.66b
Mobile traffic (India) grew 29.9% YoY and 4.5% QoQ (vs 10% growth reported by
Idea) to 199b minutes (vs est of 203b) led by lower MOU.
MOU declined to 449 min, down 1% QoQ (vs an increase of 1.8% QoQ for Idea)
RPM declined 14.7% YoY and 0.8% QoQ (lowest in the past eight quarters; in line
with Idea) to Rs0.44 (1.2% above estimates).
Bharti's RPM has remained stable for two quarters despite overcapacity and multi
SIM phenomenon.
Mobile ARPU declined 14% YoY and 1.8% QoQ to Rs198 (vs estimate of Rs200);
Idea's ARPU increased 0.6% QoQ in 3QFY11.
Bharti's blended monthly churn at 7.8% is highest in past five years, reflecting
competitive pressure.
Mobile services (India and South Asia): Broadly inline
Mobile revenue increased 13.1% YoY and 3.9% QoQ to Rs91.5b (in line with est).
EBITDA increased 5.1% YoY and 3.2% QoQ to Rs32b (1.3% below est).
EBITDA margin declined ~23bp QoQ to 34.9% (vs est of 35.3%).
Management is confident that Bharti remains well positioned for MNP (implemented
effective January 20th 2011) and has so far been a net positive on subscribers.
Bharti has launched 3G services in Karnataka and Tamil Nadu and expects to roll-out
in 13 circles (where it won 3G spectrum) by Mar-11.
Bharti is seeking alliances for 3G with other quality operators for a pan India 3G
footprint.
Non-voice business contributed 13.8% to mobile revenue in 3QFY11 and has increase
by ~4 percentage points over the past five quarters.
We expect data to be a significant contributor for Bharti going forward post 3G launch.
Enterprise and Telemedia: Weak quarter
Enterprise revenue increased 0.8% QoQ but declined 4.9% YoY to Rs10.5b; EBITDA
stood at Rs2.3b, down 12.1% QoQ and 31% YoY.
Telemedia revenue stood Rs9.1b, down 0.5% QoQ but up 6.1% YoY; EBITDA was
down 3.7% QoQ but up 2.8% YoY to Rs4b.
Telemedia subscribers grew 1.3% QoQ to 3.3m; ARPU declined from Rs954 in 2QFY11
to Rs934 in 3QFY11 (0.6% below our estimate).
Passive infrastructure: Strong growth led by margin expansion
Passive infrastructure segment revenues and EBITDA include standalone operations
of Bharti Infratel and proportionate consolidation of 42% stake in Indus Towers.
Revenue increased 19.4% YoY and 3.8% QoQ to Rs22b. EBITDA increased 35.4%
YoY and 8% QoQ at Rs8.5b.
Bharti Infratel has a portfolio of ~32,424 towers with a tenancy ratio of 1.7x.
Indus towers has a portfolio of ~107,789 towers with a tenancy ratio of 1.81x.
Indus towers has sharing revenue per operator per month (SRPO) of ~Rs30,847 (~23%
discount v/s Bharti Infratel).
Positive signs of elasticity and usage growth in Africa; margin stable
Africa revenue of US$ 911m was 1.4% above our est of US$ 898m.
EBITDA (before re-branding) was US$212m implying an EBITDA margin of 23.3%
(vs margin of 23.1% in 2QFY11).
Net loss of Rs5.25b vs Rs3.79b in 2QFY11 and our estimate of Rs2.86b mainly due to
forex loss of Rs1.6b and brand-launch expense of Rs1.7b.
MOU per subscriber increased to 120 mins per month vs 112 mins in 2QFY11 (1.7%
above our estimate of 118mins)
RPM declined 7.9% QoQ from 6.6 US cents in 2QFY11 to 6.1 US cents (vs 1.5%
below our estimate of 6.2 US cents).
ARPU declined 1.4% QoQ at US$7.3, as increased MOU was offset by decline in
RPM.
Bharti has taken tariff cuts in all 16 countries to eliminate the pricing differential vs
competition.
Active (last one month basis) subscriber base increased to 42.1m in 3QFY11 (vs
40.1m in 2QFY11)
Churn levels remain high at 5.9% per month.
Key challenges in Africa include logistics, high labor costs and low availability of
skilled manpower.
All outsourcing contracts (Network, IT, BPO) have been closed in Africa; employee
transition has started.
Current capex in Africa has been focused mainly on capacity. 70% of the capex
would be on coverage from FY12.
The management expects Africa margins to grow at healthy clip and appeared confident
of achieving target of US$5b revenue, US$2b EBITDA and 100m subscribers in Africa
by FY13.
Net debt QoQ at Rs600b; forex loss of ~Rs1.51b
Bharti's net debt remained flat QoQ to ~Rs600b, implying a net debt/equity of 1.28x
and net debt/annualized EBITDA of 2.8x.
During the quarter, Bharti reported a forex loss of ~Rs1.51b vs forex gain of ~Rs2.5b
in 2QFY11.
India capex flat QoQ; Africa capex to remain at US$800m
India capex guidance (ex-towers) remains at US$1.8-2b in FY11 (9M capex at
~US$1.3b).
Africa capex guidance has been maintained at US$800m.
Bharti added ~3,500 cell-sites during the quarter vs 4,600 cell-sites in 2QFY11.
FY12/13 estimates largely unchanged; 22% EBITDA CAGR over FY11E-13E;
Buy
While we have downgraded FY11 EBITDA and PAT estimates by 3-5% to factor-in
forex loss and brand launch expenses, our FY12/13 estimates remain largely unchanged.
We remain positive given 1) strong traffic growth outlook despite stabilizing RPM, 2)
traction in non-voice business post 3G launch, 3) improving regulatory environment,
and 4) initial signs of elasticity in Africa.
We expect 22% EBITDA CAGR and 30% PAT CAGR over FY11E-13E driven by
normalized growth in India business and margin inflection in Africa business.
At CMP of Rs323, the stock trades at proportionate EV/EBITDA of 7x FY12E and
5.6x FY13E. Maintain Buy with a target price of Rs410, 27% upside.
Company description
Bharti Airtel is an integrated telecom operator with presence
in wireless, fixed-line and broadband, long distance,
enterprise, and passive infrastructure services across India,
Sri Lanka, Bangladesh and Africa. Bharti is the largest
Indian wireless operator with a subscriber market share of
~21% and population coverage of 85%. Post its acquisition
of Zain's Africa business, Bharti has become the fifth largest
wireless company globally by subscribers, with a subscriber
base of 208m.
Key investment arguments
Bharti continues to consolidate its wireless leadership
in India with a wireless subscriber share of 20%+ and
adjusted gross revenue share of 30%+.
Bharti is well positioned to capture rural growth by
leveraging its deep coverage and favorable frequency
allocation - a significant competitive advantage in lowdensity
regions.
Bharti has won 3G spectrum in 13 circles which will
support voice decongestion as well as development of
new revenue streams from data services in the maturing
urban market. Bharti is launching 3G services in 13
circles during 4QFY11. We expect incremental 3G
revenue to contribute 3-4% of wireless revenues in
FY12E.
We expect 16% revenue CAGR, 22% EBITDA CAGR
and 30% PAT CAGR over FY11-13E.
Key investment risks
MNP implementation likely to put pressure on post-paid
RPM; subscriber retention costs to remain an overhang.
Implementation of TRAI recommendations on
'Licensing framework and Spectrum management' could
prove to be adverse for incumbents like Bharti.
Recent developments
Bharti launched 'Airtel' brand in Africa and re-launched
in India and South Asia markets.
Bharti has launched 3G services in Karnataka and Tamil
Nadu circles.
Valuation and view
While we have downgraded FY11 EBITDA and PAT
estimates by 3-5% to factor-in forex loss and brand
launch expenses, our FY12/13 estimates remain largely
unchanged.
We remain positive given 1) strong traffic growth
outlook despite stabilizing RPM, 2) traction in non-voice
business post 3G launch, 3) improving regulatory
environment, and 4) initial signs of elasticity in Africa.
We expect 22% EBITDA CAGR and 30% PAT CAGR
over FY11E-13E driven by normalized growth in India
business and margin inflection in Africa business.
At CMP of Rs323, the stock trades at proportionate
EV/EBITDA of 7x FY12E and 5.6x FY13E. Maintain
Buy with a target price of Rs410, 27% upside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti's 3QFY11 PAT declined 41% YoY and 22% QoQ to Rs13b (estimate of Rs17b) led by brand re-launch expenses
of Rs3.4b and forex loss of Rs1.5b. Consolidated revenue of Rs157.6 b (up 53% YoY and 3.6% QoQ) and EBITDA
(before brand re-launch exp) of Rs53.2b were broadly in line (1% below estimate). While traffic growth in India
operations was slightly below expectations, positives include strong revenue traction in Africa and continued stability
in India RPM/Africa margins.
3QFY11 Result highlights: Traffic growth for India mobile business at 4.5% QoQ, lower than our estimate of 6.3%
growth. RPM decline of only 0.8% QoQ (lowest in the past eight quarters) to Rs0.44, better than our estimate of 2%
decline. Continued positive elasticity and revenue momentum in Africa business with traffic up 16.6% QoQ, MOU per
subscriber up 7.1% QoQ and revenue up 8.7% QoQ. Flat QoQ margin for Africa (including Africa corporate expenses
but excluding brand launch expenses) at 23.3%, in line with our estimate. All outsourcing contracts (Network, IT,
BPO) have been closed in Africa; employee transition has started. Brand re-launch expenses of Rs3.4b and forex
loss of Rs1.5b at the consolidated level, both not included in our estimates.India capex guidance (ex-towers) remains
at US$1.8-2b in FY11 (9M capex at ~US$1.3b); capex for Africa to remain at US$800m/year. Net debt flat QoQ at
Rs599b.
FY12/13 estimates largely unchanged; 22% EBITDA CAGR over FY11E-13E; Buy: While we have downgraded
FY11 EBITDA and PAT estimates by 3-5% to factor-in forex loss and brand launch expenses, our FY12/13 estimates
remain largely unchanged. We remain positive given 1) strong traffic growth outlook despite stabilizing RPM, 2)
traction in non-voice business post 3G launch, 3) improving regulatory environment, and 4) initial signs of elasticity in
Africa. We expect 22% EBITDA CAGR and 30% PAT CAGR over FY11E-13E driven by normalized growth in India
business and margin inflection in Africa business. At CMP of Rs323, the stock trades at proportionate EV/EBITDA of
7x FY12E and 5.6x FY13E. Maintain Buy with a target price of Rs410, 27% upside.
India and South Asia revenue and adj. EBITDA up 3.5% QoQ
India and South Asia revenue grew 3.4% QoQ and 13.7% YoY to Rs117.2b (vs estimate
of 4% growth).
EBITDA (before re-branding) grew 3.6% QoQ and 7.2% YoY to Rs43.7b (vs estimate
of 5% growth).
EBITDA margin declined 229bp YoY but remained flat QoQ to 37.3%.
Net income of Rs18.3b was 7.8% below our estimate of Rs19.8b due to brand relaunch
expenses of Rs1.66b
Mobile traffic (India) grew 29.9% YoY and 4.5% QoQ (vs 10% growth reported by
Idea) to 199b minutes (vs est of 203b) led by lower MOU.
MOU declined to 449 min, down 1% QoQ (vs an increase of 1.8% QoQ for Idea)
RPM declined 14.7% YoY and 0.8% QoQ (lowest in the past eight quarters; in line
with Idea) to Rs0.44 (1.2% above estimates).
Bharti's RPM has remained stable for two quarters despite overcapacity and multi
SIM phenomenon.
Mobile ARPU declined 14% YoY and 1.8% QoQ to Rs198 (vs estimate of Rs200);
Idea's ARPU increased 0.6% QoQ in 3QFY11.
Bharti's blended monthly churn at 7.8% is highest in past five years, reflecting
competitive pressure.
Mobile services (India and South Asia): Broadly inline
Mobile revenue increased 13.1% YoY and 3.9% QoQ to Rs91.5b (in line with est).
EBITDA increased 5.1% YoY and 3.2% QoQ to Rs32b (1.3% below est).
EBITDA margin declined ~23bp QoQ to 34.9% (vs est of 35.3%).
Management is confident that Bharti remains well positioned for MNP (implemented
effective January 20th 2011) and has so far been a net positive on subscribers.
Bharti has launched 3G services in Karnataka and Tamil Nadu and expects to roll-out
in 13 circles (where it won 3G spectrum) by Mar-11.
footprint.
Non-voice business contributed 13.8% to mobile revenue in 3QFY11 and has increase
by ~4 percentage points over the past five quarters.
We expect data to be a significant contributor for Bharti going forward post 3G launch.
Enterprise and Telemedia: Weak quarter
Enterprise revenue increased 0.8% QoQ but declined 4.9% YoY to Rs10.5b; EBITDA
stood at Rs2.3b, down 12.1% QoQ and 31% YoY.
Telemedia revenue stood Rs9.1b, down 0.5% QoQ but up 6.1% YoY; EBITDA was
down 3.7% QoQ but up 2.8% YoY to Rs4b.
Telemedia subscribers grew 1.3% QoQ to 3.3m; ARPU declined from Rs954 in 2QFY11
to Rs934 in 3QFY11 (0.6% below our estimate).
Passive infrastructure: Strong growth led by margin expansion
Passive infrastructure segment revenues and EBITDA include standalone operations
of Bharti Infratel and proportionate consolidation of 42% stake in Indus Towers.
Revenue increased 19.4% YoY and 3.8% QoQ to Rs22b. EBITDA increased 35.4%
YoY and 8% QoQ at Rs8.5b.
Bharti Infratel has a portfolio of ~32,424 towers with a tenancy ratio of 1.7x.
Indus towers has a portfolio of ~107,789 towers with a tenancy ratio of 1.81x.
Indus towers has sharing revenue per operator per month (SRPO) of ~Rs30,847 (~23%
discount v/s Bharti Infratel).
Positive signs of elasticity and usage growth in Africa; margin stable
Africa revenue of US$ 911m was 1.4% above our est of US$ 898m.
EBITDA (before re-branding) was US$212m implying an EBITDA margin of 23.3%
(vs margin of 23.1% in 2QFY11).
Net loss of Rs5.25b vs Rs3.79b in 2QFY11 and our estimate of Rs2.86b mainly due to
forex loss of Rs1.6b and brand-launch expense of Rs1.7b.
MOU per subscriber increased to 120 mins per month vs 112 mins in 2QFY11 (1.7%
above our estimate of 118mins)
RPM declined 7.9% QoQ from 6.6 US cents in 2QFY11 to 6.1 US cents (vs 1.5%
below our estimate of 6.2 US cents).
ARPU declined 1.4% QoQ at US$7.3, as increased MOU was offset by decline in
RPM.
Bharti has taken tariff cuts in all 16 countries to eliminate the pricing differential vs
competition.
Active (last one month basis) subscriber base increased to 42.1m in 3QFY11 (vs
40.1m in 2QFY11)
Churn levels remain high at 5.9% per month.
Key challenges in Africa include logistics, high labor costs and low availability of
skilled manpower.
All outsourcing contracts (Network, IT, BPO) have been closed in Africa; employee
transition has started.
Current capex in Africa has been focused mainly on capacity. 70% of the capex
would be on coverage from FY12.
The management expects Africa margins to grow at healthy clip and appeared confident
of achieving target of US$5b revenue, US$2b EBITDA and 100m subscribers in Africa
by FY13.
Net debt QoQ at Rs600b; forex loss of ~Rs1.51b
Bharti's net debt remained flat QoQ to ~Rs600b, implying a net debt/equity of 1.28x
and net debt/annualized EBITDA of 2.8x.
During the quarter, Bharti reported a forex loss of ~Rs1.51b vs forex gain of ~Rs2.5b
in 2QFY11.
India capex flat QoQ; Africa capex to remain at US$800m
India capex guidance (ex-towers) remains at US$1.8-2b in FY11 (9M capex at
~US$1.3b).
Africa capex guidance has been maintained at US$800m.
Bharti added ~3,500 cell-sites during the quarter vs 4,600 cell-sites in 2QFY11.
FY12/13 estimates largely unchanged; 22% EBITDA CAGR over FY11E-13E;
Buy
While we have downgraded FY11 EBITDA and PAT estimates by 3-5% to factor-in
forex loss and brand launch expenses, our FY12/13 estimates remain largely unchanged.
We remain positive given 1) strong traffic growth outlook despite stabilizing RPM, 2)
traction in non-voice business post 3G launch, 3) improving regulatory environment,
and 4) initial signs of elasticity in Africa.
We expect 22% EBITDA CAGR and 30% PAT CAGR over FY11E-13E driven by
normalized growth in India business and margin inflection in Africa business.
At CMP of Rs323, the stock trades at proportionate EV/EBITDA of 7x FY12E and
5.6x FY13E. Maintain Buy with a target price of Rs410, 27% upside.
Company description
Bharti Airtel is an integrated telecom operator with presence
in wireless, fixed-line and broadband, long distance,
enterprise, and passive infrastructure services across India,
Sri Lanka, Bangladesh and Africa. Bharti is the largest
Indian wireless operator with a subscriber market share of
~21% and population coverage of 85%. Post its acquisition
of Zain's Africa business, Bharti has become the fifth largest
wireless company globally by subscribers, with a subscriber
base of 208m.
Key investment arguments
Bharti continues to consolidate its wireless leadership
in India with a wireless subscriber share of 20%+ and
adjusted gross revenue share of 30%+.
Bharti is well positioned to capture rural growth by
leveraging its deep coverage and favorable frequency
allocation - a significant competitive advantage in lowdensity
regions.
Bharti has won 3G spectrum in 13 circles which will
support voice decongestion as well as development of
new revenue streams from data services in the maturing
urban market. Bharti is launching 3G services in 13
circles during 4QFY11. We expect incremental 3G
revenue to contribute 3-4% of wireless revenues in
FY12E.
We expect 16% revenue CAGR, 22% EBITDA CAGR
and 30% PAT CAGR over FY11-13E.
Key investment risks
MNP implementation likely to put pressure on post-paid
RPM; subscriber retention costs to remain an overhang.
Implementation of TRAI recommendations on
'Licensing framework and Spectrum management' could
prove to be adverse for incumbents like Bharti.
Recent developments
Bharti launched 'Airtel' brand in Africa and re-launched
in India and South Asia markets.
Bharti has launched 3G services in Karnataka and Tamil
Nadu circles.
Valuation and view
While we have downgraded FY11 EBITDA and PAT
estimates by 3-5% to factor-in forex loss and brand
launch expenses, our FY12/13 estimates remain largely
unchanged.
We remain positive given 1) strong traffic growth
outlook despite stabilizing RPM, 2) traction in non-voice
business post 3G launch, 3) improving regulatory
environment, and 4) initial signs of elasticity in Africa.
We expect 22% EBITDA CAGR and 30% PAT CAGR
over FY11E-13E driven by normalized growth in India
business and margin inflection in Africa business.
At CMP of Rs323, the stock trades at proportionate
EV/EBITDA of 7x FY12E and 5.6x FY13E. Maintain
Buy with a target price of Rs410, 27% upside.
No comments:
Post a Comment