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Bharti/Idea likely to miss consensus estimates in 2Q?
2Q consensus likely to come down in coming weeks, in our view
We believe Bloomberg consensus is yet to factor in higher forex estimates
for Bharti and higher wages/D&A/3G interest expenses for Idea in 2QFY11
estimates, therefore we see downside risks to consensus. Our 2Q net profit
estimates are 30.5%/16.8% below consensus for Bharti/Idea. However, we
believe consensus is yet to fully evolve and see consensus numbers
coming down before the 2Q results. On the operational front, we believe
that the market is largely factoring in the seasonal weakness (our revenue
estimates are largely in line with consensus).
Bharti may miss consensus estimates for sixth quarter in a row
Bharti has missed Bloomberg consensus estimates for the last five
quarters, either due to relatively weaker execution or limited visibility from
management on the impact of expenses like branding costs, tax rates or
amortization/interest expenses. This quarter too we see the risk of a
consensus miss, as it may be difficult for analysts (and hence consensus)
to factor in exactly the forex MTM loss impact. If this trend of missing
consensus continues, we do not rule out a PE de-rating for Bharti.
Idea misses consensus ests every 2Q; history may repeat itself...
Idea has shown consistently strong execution but ends up missing
consensus estimates every 2Q. This is led by a double impact: 1)
pronounced impact on MOU/ARPU due to seasonality as it is a purewireless operator/higher proportion of rural subs; 2) higher employee costs
every 2Q. Combined, these factors lead to negative operational leverage.
In 2QFY12, apart from the above two factors, we estimate higher D&A/int.
expense for 3G, which in our view consensus is yet to factor in.
Looking beyond 2Q: operators to benefit from tariff hikes/3G
Despite a weak 2Q, we reiterate our Buy on Bharti/Idea, as we expect the
tariff hike benefits/3G uptake to be fully reflected in their financials in the
next six months, hence see strong qoq/yoy growth. We reduce our
FY12E/FY13E/FY14E EPS for Bharti by 9.1%/4.8%/4.5% to
Rs14.84/Rs26.85/Rs34.66, and for Idea by 4.1%/2.5%/1.3% to
Rs2.77/4.47/6.78 as we factor in a slowing net adds trend and model in a
higher forex impact due to adverse currency movements. Our 12m SOTPbased TPs for Bharti/Idea fall accordingly 2% to Rs450/Rs108 respectively
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Bharti/Idea likely to miss consensus estimates in 2Q?
2Q consensus likely to come down in coming weeks, in our view
We believe Bloomberg consensus is yet to factor in higher forex estimates
for Bharti and higher wages/D&A/3G interest expenses for Idea in 2QFY11
estimates, therefore we see downside risks to consensus. Our 2Q net profit
estimates are 30.5%/16.8% below consensus for Bharti/Idea. However, we
believe consensus is yet to fully evolve and see consensus numbers
coming down before the 2Q results. On the operational front, we believe
that the market is largely factoring in the seasonal weakness (our revenue
estimates are largely in line with consensus).
Bharti may miss consensus estimates for sixth quarter in a row
Bharti has missed Bloomberg consensus estimates for the last five
quarters, either due to relatively weaker execution or limited visibility from
management on the impact of expenses like branding costs, tax rates or
amortization/interest expenses. This quarter too we see the risk of a
consensus miss, as it may be difficult for analysts (and hence consensus)
to factor in exactly the forex MTM loss impact. If this trend of missing
consensus continues, we do not rule out a PE de-rating for Bharti.
Idea misses consensus ests every 2Q; history may repeat itself...
Idea has shown consistently strong execution but ends up missing
consensus estimates every 2Q. This is led by a double impact: 1)
pronounced impact on MOU/ARPU due to seasonality as it is a purewireless operator/higher proportion of rural subs; 2) higher employee costs
every 2Q. Combined, these factors lead to negative operational leverage.
In 2QFY12, apart from the above two factors, we estimate higher D&A/int.
expense for 3G, which in our view consensus is yet to factor in.
Looking beyond 2Q: operators to benefit from tariff hikes/3G
Despite a weak 2Q, we reiterate our Buy on Bharti/Idea, as we expect the
tariff hike benefits/3G uptake to be fully reflected in their financials in the
next six months, hence see strong qoq/yoy growth. We reduce our
FY12E/FY13E/FY14E EPS for Bharti by 9.1%/4.8%/4.5% to
Rs14.84/Rs26.85/Rs34.66, and for Idea by 4.1%/2.5%/1.3% to
Rs2.77/4.47/6.78 as we factor in a slowing net adds trend and model in a
higher forex impact due to adverse currency movements. Our 12m SOTPbased TPs for Bharti/Idea fall accordingly 2% to Rs450/Rs108 respectively
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