Bharti Infratel - Nirmal Bang Institutional

- Bharti Infratel's (BIL) 1QFY14 revenue stood at Rs26.2bn, up 8.5% YoY but down 1.9% QoQ, below our/Bloomberg consensus estimates by 4%/3.9%, respectively. Total tenants rose 4.3% YoY (0.9% QoQ) to 158,038.

- Gross sharing revenue/operator rose 3.9% YoY (down 2.5% QoQ) to Rs55,554/month, while net sharing revenue/operator rose 1% YoY (down 2.5% QoQ) to Rs34,079/month. It should be noted that in 1QFY14, BIL Ventures merged with Indus Towers subsequent to which the indefeasible right to use (IRU) arrangement between them ceased to exist and so separate IRU accounting in consolidated financials is not required.

- Due to the merger, reported revenue was down by Rs500mn. BIL surprised positively on the margins front, up 358bps YoY and 255bps QoQ, on lower rent and other expenses; adjusted for the merger, margins rose 229bps YoY and 127bps QoQ. Higher margins led net profit to rise 67.6% YoY and 24.5% QoQ. Adjusted for the merger, net profit was up 51.2% YoY and 12.3% QoQ.

- We have increased our FY14E/FY15E EPS by 9.7%/5.4%, respectively, retaining Buy rating on BIL with a revised DCF-based target price of Rs197 (Rs192 earlier) owing to improved cash flow. The valuation at 5x FY15E EV-EBITDA, 10% FY15E FCF yield and FY15E cash/share of Rs50 (34% of current market capitalisation) should provide strong downside support to the stock.

Source : Equity Bulls

Keywords