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.