Citigroup Research is bullish on Bharti Airtel and has recommended buy rating on the stock with the target price of Rs 1050.
Citigroup Research report on Bharti Airtel:
Upgrading target price, earnings
We are revising our target price to Rs 1,050 per share (incl. Rs 157 for towerco) on subscriber estimate revisions, higher market share and towerco value upgrade. Upgrading FY08-09E earnings by 6-13%. Introducing FY10E. The core DCF value of Rs 890 per share imputes an EV/EBITDA of 11.5x FY09E, P/E of 20.3x and P/CEPS of 13.1x.
Growth momentum accelerating
Spectrum uncertainty largely ensures that Bharti's undiluted leverage to growth will gather momentum in FY08E resulting in a 27% market share of net additions. Though this should trend downwards to reflect the entry of new players and an active BSNL post-FY08, subscriber additions would continue to remain robust.
Raising towerco value to Rs 157 per share (USD 7.3 billion)
This is mainly due to forecasted increase in towers required to accommodate higher MOUs. Towerco value accrues from Bharti's highest tower count, aggressive buildout plans and better sharing visibility (agreement with Vodafone). Immediateterm impact on Bharti's EBITDA margins are manageable and partially factored in.
Bharti remains the top pick
Bharti remains our top pick in the region with its peerless execution setting it apart from the other telcos. The lack of headroom in the foreign limit remains an irritant though to gain exposure. Maintain buy/ low risk.
