JM Financial recommended hold rating on Bharti Infratel with a target price of Rs 335 in its research report dated October 30, 2017.
JM Financial's research report on Bharti Infratel
Consol. 2Q FY18 EBITDA of INR 16.34bn [+12.4% yoy] was 1.2% below our forecast. Core EBITDA [+9.3%] miss of 3.5% was driven entirely by revenues [+9.2%], as net tenancy-adds crashed 78% qoq to 1687 [-30%]—gross adds halved qoq to 4398 and tenancy churn or exits surged by 136% to 2711 in 2Q, vs. an average of 723 in the previous four quarters. We maintain FY18 will likely be the last year of double-digit EBITDA growth for BHIN. While tenancy adds from Jio should remain strong, the underlying losses would continue, as smaller telcos are rushing for the exit door. Moreover, Idea/Voda merger will result in significant tenancy losses, likely from FY19. We recommend taking profits on BHIN stock.
BHIN board today announced it is evaluating stake acquisition in Indus, but this is largely reflecting in the share price, in our view. Upside risks are: (1) Airtel ceding control of BHIN at premium valuations—resulting in open offer for minority shareholders; and (2) favorable re-pricing of tenancy contracts resulting in higher rental escalations versus 2.5% currently.
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