Maintain Buy on Bharti Airtel - Motilal Oswal

Bharti Airtel (BHARTI IN; Mkt Cap USD26.9b, CMP Rs323, Buy)

Bharti's 3QFY11 PAT declined 41% YoY and 22% QoQ to Rs13b (estimate of Rs17b) led by brand re-launch expenses of Rs3.4b and forex loss of Rs1.5b.

Traffic growth for India mobile business at 4.5% QoQ, lower than estimate of 6.3% growth. RPM decline of only 0.8% QoQ (lowest in the past eight quarters)

Continued positive elasticity & revenue momentum in Africa business with traffic up 16.6% QoQ, MOU per subscriber up 7.1% QoQ and revenue up 8.7% QoQ.

India capex guidance (ex-towers) remains at US$1.8-2b in FY11 (9M capex at ~US$1.3b); capex for Africa to remain at US$800m/year. Net debt flat QoQ.

Our FY12/13 estimates remain largely unchanged. We remain positive given 1) strong traffic growth outlook despite stabilizing RPM, 2) traction in non-voice business post 3G launch, 3) improving regulatory environment, and 4) initial signs of elasticity in Africa. At CMP of Rs323, the stock trades at proportionate EV/EBITDA of 7x FY12E and 5.6x FY13E. Maintain Buy with a target price of Rs410, 27% upside.

Source : Equity Bulls

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