1Q: largely in line
RESULTS REVIEW
1Q largely in line; gross adds weaker than expected
Adjusted revenue missed our revenue by 1.3% while EBITDA and EPS beat
our estimate by 1.3% and 6.7% respectively. Gross adds for the quarter
were weak at 1,583 sites (4Q: 2,923) due to soft network rollout by telcos.
BHIN’s tenancy remained at 1.91x. The reported EBITDA beat was driven
by accounting change and cost efficiencies.
SUMMARY
Strong data growth and return of pricing power for telcos
Bharti Infratel is well positioned to benefit from data growth in India, in
our view. Indian telecom operators’ data revenue is increasing at a
healthy 20-25% q-q and falling 3G data tariffs could boost volumes.
Improvement in telecom operators’ RPM and profitability would improve
their ability to invest in networks which in turn would benefit BHIN.
VALUATION
No reason to significantly change our EPS forecast: BUY
BHIN trades at an attractive 5.1x FY15E EV/EBITDA, a discount to Indian
telecom operators at 5.8-7.1x. It has net cash of INR19 per share (13% of
CMP) and generates strong FCF. We do not expect significant changes to
our earnings forecasts on the back of the 1Q results. Capex was lower
than we expected, at INR3b, but the company retained its annual capex
guidance of INR20b. The average residual life of contract is 7.4 years.
Promoter Bharti Airtel has fully repaid its INR23b loan to BHIN. BHIN
continues to evaluate inorganic opportunities. Some of BHIN’s towers
merged with Indus Towers (Not Listed) effective 10 June, negatively
impacting revenue and costs with a net positive impact on EBITDA.
��
RESULTS REVIEW
1Q largely in line; gross adds weaker than expected
Adjusted revenue missed our revenue by 1.3% while EBITDA and EPS beat
our estimate by 1.3% and 6.7% respectively. Gross adds for the quarter
were weak at 1,583 sites (4Q: 2,923) due to soft network rollout by telcos.
BHIN’s tenancy remained at 1.91x. The reported EBITDA beat was driven
by accounting change and cost efficiencies.
SUMMARY
Strong data growth and return of pricing power for telcos
Bharti Infratel is well positioned to benefit from data growth in India, in
our view. Indian telecom operators’ data revenue is increasing at a
healthy 20-25% q-q and falling 3G data tariffs could boost volumes.
Improvement in telecom operators’ RPM and profitability would improve
their ability to invest in networks which in turn would benefit BHIN.
VALUATION
No reason to significantly change our EPS forecast: BUY
BHIN trades at an attractive 5.1x FY15E EV/EBITDA, a discount to Indian
telecom operators at 5.8-7.1x. It has net cash of INR19 per share (13% of
CMP) and generates strong FCF. We do not expect significant changes to
our earnings forecasts on the back of the 1Q results. Capex was lower
than we expected, at INR3b, but the company retained its annual capex
guidance of INR20b. The average residual life of contract is 7.4 years.
Promoter Bharti Airtel has fully repaid its INR23b loan to BHIN. BHIN
continues to evaluate inorganic opportunities. Some of BHIN’s towers
merged with Indus Towers (Not Listed) effective 10 June, negatively
impacting revenue and costs with a net positive impact on EBITDA.
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