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Bharti Infratel (Q2 FY14)

India Infoline Research Team / 15:38 , Oct 29, 2013

CMP Rs154, Target Rs180, Upside 17%

  • Bharti Infratel posted 2.4%/2.5% qoq rise in Q2 revenues/EBIDTA though PAT declined ~22% qoq impacted by MTM hit on investments, higher tax rate

  • Standalone tenancy rose to 1.84x from 1.82x in the previous quarter while EBIDTA margin remained stable at 40% as higher fuel costs (due to rise in electricity and diesel prices) and staff expenses were offset by lower repair & maintenance charges

  • Company mentioned in its conference call that 1) regulatory environment is stabilizing as TRAI recommends lower spectrum reserve price for auctions 2) realized rate is going up while data revenues are rising at robust rate of 20-25% on qoq basis 3) next auction of 3G spectrum to enable completion of 3G footprint for operators 4) reduction in operator SG&A costs all of which contribute to a positive outlook for tower demand

  • Company reduced its capex guidance from earlier Rs20bn to Rs15bn for FY14; adjusted fund flow from operations (EBIDTA less maintenance and general corporate capex) also increased 17% yoy to Rs9.4bn. Post Q2 results, we retain our estimates and reiterate BUY with 9-12 mth target of Rs180.

Results table
(Rs m)
Q2 FY14
Q1 FY14
% qoq
Q2 FY13
% yoy
Net sales
26,837
26,220
2.4
25,555
5.0
Power & fuel
(10,407)
(9,990)
4.2
(9,627)
8.1
Rent
(2,215)
(2,158)
2.6
(2,610)
(15.1)
Repair & maintenance
(2,041)
(2,232)
(8.6)
(2,100)
(2.8)
Staff
(928)
(866)
7.2
(834)
11.3
Other expenses
(517)
(511)
1.2
(833)
(37.9)
Operating profit
10,729
10,463
2.5
9,551
12.3
OPM (%)
40.0
39.9
7 bps
37.4
260 bps
Depreciation
(5,326)
(5,528)
(3.7)
(5,528)
(3.7)
Interest
(1,335)
(1,044)
27.9
(1,033)
29.2
Other income
569
1,556
(63.4)
672
(15.3)
PBT
4,637
5,447
(14.9)
3,662
26.6
Tax
(1,863)
(1,871)
(0.4)
(1,186)
57.1
Effective tax rate (%)
40.2
34.3
583 bps
32.4
779 bps
PAT
2,774
3,576
(22.4)
2,476
12.0
PAT margin (%)
10.3
13.6
(330) bps
9.7
65 bps
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m)
FY12
FY13
FY14E
FY15E
Revenues
94,521
102,720
110,281
118,368
yoy growth (%)
11.1
8.7
7.4
7.3
Operating profit
35,343
38,302
41,653
44,944
OPM (%)
37.4
37.3
37.8
38.0
Reported PAT
7,491
10,025
12,029
14,667
yoy growth (%)
35.8
33.8
20.0
21.9
EPS (Rs)
12.9
5.3
6.4
7.8
P/E (x)
11.9
29.0
24.1
19.8
Price/Book (x)
2.0
1.7
1.6
1.6
EV/EBITDA (x)
9.2
8.4
7.2
6.4
Debt/Equity (x)
0.2
0.2
0.2
0.1
RoE (%)
5.3
5.8
6.9
8.2
RoCE (%)
8.2
9.6
10.1
11.4
Source: Company, India Infoline Research