Bharti Airtel : Buy; Price target: Rs450 :: ShareKhan PDF link

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Bharti Airtel 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs450
Current market price: Rs338

Read through MTN results for Bharti

Over the last two days, two developments pertaining to Bharti Airtel (Bharti) have taken place- (1) MTN's results were declared which provided some understanding on the competitive scenario in Bharti's major African regions of operation and (2) the Telecom Regulatory Authority of India (TRAI) issuing a consultation paper on auction of spectrum. We present below the analysis of the same and their likely implication on Bharti Airtel. 

Bharti to remain under pressure in short term: Taking cues from these two developments; viz consultation paper that talks of spectrum refarming, (that would entail high operational cost for incumbent players like Bharti and Idea those have substantial spectrum in the efficient 900MHZ band), coupled with MTN results that implicitly state that if Bharti Africa has to continue gaining market share in the African region, it has to up its ante on the capex front, would put some strain on its African cash flow position. Further the competitive and cost landscape in Africa would continue to remain though (as seen from MTN's results and comments). Thus we believe that Bharti Africa is likely to miss its stated objective of reaching 40% market share by FY2013 and attaining the same may get stretched by a 12-18 month time frame. In the absence of potential revenue enhancement as well as sentimental triggers, coupled with constant overhang and negative outcome of regulatory policy, we believe that Bharti is likely to remain under pressure in short term. We however continue to maintain our Buy rating on the stock with price target at Rs450 (8.1x FY2013EV/EBITDA). Further any clarity on pending regulatory issues is likely to drive stock performance in the near term.  

 Click here to read report: Investor's Eye