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RECO : HOLD TP : Rs 345
Investment Rationale
§ Bharti Airtel continues to maintain its leadership position with strong subscriber additions and healthy revenue
market share of 32.0%
§ Regulatory environment remains a concern: Re-pricing of spectrum charge, increase in spectrum fee, re-farming
of spectrum has put the telecom stocks under pressure
§ Rebound in traffic on network and stable KPI’s to support the revenue growth going forward. As a incumbent with
the hefty subscriber base, we expect Bharti is expected to benefit the most from 3G and MNP
§ Improving economics of African operations, in-terms of both the incremental subscriber addition and revenue and
EBITDA margins. We have estimated the margins from African business to improve 22.4% in FY11E to 26.4% in
FY12E.
§ Balance sheet health to improve from next fiscal year. We estimate net debt/ EBITDA to reduce from 2.7x to 1.9x
in FY12E. We expect Bharti to be FCF +ve in FY12E. Unlocking of value in the tower business (either in Indus or
Bharti Infratel) could give an upside trigger to the stock
§ Estimating strong revenue and EBIDTA CAGR of 19.8% and 25.8% respectively over FY10-12E
Valuations
§ At CMP of Rs.358, stock trades at EV/EBIDTA of 9.6x and 7.3x and PE of 21.8x and 16.5x for FY11E and FY12E
respectively. Bharti remains our top pick in the sector, we recommend HOLD with target price Rs345. We
maintain our cautious view on the sector till the clouds of regulatory uncertainties fade away.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RECO : HOLD TP : Rs 345
Investment Rationale
§ Bharti Airtel continues to maintain its leadership position with strong subscriber additions and healthy revenue
market share of 32.0%
§ Regulatory environment remains a concern: Re-pricing of spectrum charge, increase in spectrum fee, re-farming
of spectrum has put the telecom stocks under pressure
§ Rebound in traffic on network and stable KPI’s to support the revenue growth going forward. As a incumbent with
the hefty subscriber base, we expect Bharti is expected to benefit the most from 3G and MNP
§ Improving economics of African operations, in-terms of both the incremental subscriber addition and revenue and
EBITDA margins. We have estimated the margins from African business to improve 22.4% in FY11E to 26.4% in
FY12E.
§ Balance sheet health to improve from next fiscal year. We estimate net debt/ EBITDA to reduce from 2.7x to 1.9x
in FY12E. We expect Bharti to be FCF +ve in FY12E. Unlocking of value in the tower business (either in Indus or
Bharti Infratel) could give an upside trigger to the stock
§ Estimating strong revenue and EBIDTA CAGR of 19.8% and 25.8% respectively over FY10-12E
Valuations
§ At CMP of Rs.358, stock trades at EV/EBIDTA of 9.6x and 7.3x and PE of 21.8x and 16.5x for FY11E and FY12E
respectively. Bharti remains our top pick in the sector, we recommend HOLD with target price Rs345. We
maintain our cautious view on the sector till the clouds of regulatory uncertainties fade away.
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