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COMPANY UPDATE
Bharti Airtel (BRTI.BO)
Buy Equity Research
Structurally well positioned; Weakness a good entry-point; CL-Buy
What's changed
We reiterate our Buy rating (on CL) on Bharti with a revised 12m PT of Rs460
(from Rs475) after 3Q earnings call. Key takeaways: 1) Management stated
that Bharti saw muted minutes growth, mainly due to impact of elasticity as
Bharti had done a pan-India tariff hike (vs. selective hikes by its peers), which
got reflected in a better RPM growth. 2) Management highlighted that Africa
local currency growth rate was c.5% qoq higher than the reported US$ growth
of 3% and operations were impacted due to one-off effects, like strikes in
Nigeria. 3) Despite 55% qoq decline in 3Q capex, management kept its FY12
capex guidance of US$3.2bn unchanged (ytd spend: US$2.3 bn). Management
highlighted that as they moved from Erlang-based procurement to “Erlang
and equipment” based- purchase, there is lumpiness in capex payments from
quarter to quarter; 4) 3Q EBITDA had several one-offs, namely one-off
provision from Bangladesh unit; increase in “others” cost item due to
sponsorships for F1 and BCCI events; one-time impact due to a fire in a
company location in Mumbai in Dec 2011 and an impact in Telemedia division
led by migration to new billing system, as some subs churned and led to
higher bad debt provision.
Implications
While our FY12-14E revenue/EBITDA of Bharti are cut by 0.2%-1.3% post
3Q, our FY12E/FY13/FY14E/ EPS are cut by 14.8%/13.1%/13.7% as we factor
in higher D&A and tax rate. We also reduce our capex after Bharti reported
55% qoq decline in 3Q capex. As a result, our 12-m SOTP-based TP is
lowered by 3% to Rs460.
Valuation
On our revised numbers, Bharti trades at FY13 EV/EBITDA and P/E of
6.9X/16.3X (vs. Asian telcos avg. of 6.8X/15.2X) and offers a FY11-14E EPS
CAGR of 26% (vs. Asian telcos avg of 3.8%).
Key risks
Price wars in India; Weaker than expected KPIs from African operations.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMPANY UPDATE
Bharti Airtel (BRTI.BO)
Buy Equity Research
Structurally well positioned; Weakness a good entry-point; CL-Buy
What's changed
We reiterate our Buy rating (on CL) on Bharti with a revised 12m PT of Rs460
(from Rs475) after 3Q earnings call. Key takeaways: 1) Management stated
that Bharti saw muted minutes growth, mainly due to impact of elasticity as
Bharti had done a pan-India tariff hike (vs. selective hikes by its peers), which
got reflected in a better RPM growth. 2) Management highlighted that Africa
local currency growth rate was c.5% qoq higher than the reported US$ growth
of 3% and operations were impacted due to one-off effects, like strikes in
Nigeria. 3) Despite 55% qoq decline in 3Q capex, management kept its FY12
capex guidance of US$3.2bn unchanged (ytd spend: US$2.3 bn). Management
highlighted that as they moved from Erlang-based procurement to “Erlang
and equipment” based- purchase, there is lumpiness in capex payments from
quarter to quarter; 4) 3Q EBITDA had several one-offs, namely one-off
provision from Bangladesh unit; increase in “others” cost item due to
sponsorships for F1 and BCCI events; one-time impact due to a fire in a
company location in Mumbai in Dec 2011 and an impact in Telemedia division
led by migration to new billing system, as some subs churned and led to
higher bad debt provision.
Implications
While our FY12-14E revenue/EBITDA of Bharti are cut by 0.2%-1.3% post
3Q, our FY12E/FY13/FY14E/ EPS are cut by 14.8%/13.1%/13.7% as we factor
in higher D&A and tax rate. We also reduce our capex after Bharti reported
55% qoq decline in 3Q capex. As a result, our 12-m SOTP-based TP is
lowered by 3% to Rs460.
Valuation
On our revised numbers, Bharti trades at FY13 EV/EBITDA and P/E of
6.9X/16.3X (vs. Asian telcos avg. of 6.8X/15.2X) and offers a FY11-14E EPS
CAGR of 26% (vs. Asian telcos avg of 3.8%).
Key risks
Price wars in India; Weaker than expected KPIs from African operations.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Asia Pacific Conviction Buy List
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