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India Equity Research Reports, IPO and Stock News
India Equity Research Reports, IPO and Stock News
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TP : Rs464
Investment Rationale
§ Bharti Airtel continues to maintain its leadership position with strong subscriber additions and healthy revenue
market share of ~31.1%
§ Stabilization in the competitive landscape and recent price of 20% in most of its circles would drive the strong
revenue and EBITDA (would be visible in numbers from Q3FY12E), going forward. As a incumbent with the hefty
subscriber base, we expect Bharti is expected to benefit the most from 3G. It claims to have already added more
than 3mn subs on 3G network.
§ Improving economics of African operations, in-terms of both the incremental subscriber addition, revenue and
EBITDA margins. We believe the network sharing contracts are on the way for African operation and once it gets
thru it would positively impact EBITDA. We estimate EBITDA margins from African operations at 28.2% for FY12E
and 30.9% for FY13E.
§ Regulatory environment remains a concern: Re-pricing of excess spectrum, re-farming of spectrum and upcoming
licences renewal in next couple of years at higher price are key issues
§ We estimate net debt/ EBITDA to reduce from 3.1x in FY11 to 1.6x in FY13E. Unlocking of value in the tower
business (either in Indus or Bharti Infratel) could also give an upside trigger to the stock
§ Estimating strong revenue and EBIDTA CAGR of 18.8% and 23.4% respectively over FY11-13E
Valuations
§ At CMP of Rs400, stock trades at EV/EBIDTA of 7.8x and 6.1x and PE of 21.6x and 14.3x for FY12E and FY13E
respectively. Bharti remains our preferred pick in the sector, we recommend ACCUMULATE with target price
Rs464. We maintain our cautious view on the sector till the regulatory uncertainties gets cleared out.
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