Accumulate Bharti Airtel; target Rs 381: P Lilladher

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Accumulate Bharti Airtel; target Rs 381: P Lilladher

Prabhudas Lilladher is bullish on Bharti Airtel (Bharti) and has recommended accumulate rating on the stock with a target price of Rs 381 in its February 8, 2012 research report.

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Prabhudas Lilladher is bullish on Bharti Airtel (Bharti) and has recommended accumulate rating on the stock with a target price of Rs 381 in its February 8, 2012 research report.

"Bharti Airtel (Bharti) reported revenues of Rs185.1bn (up 7.1% QoQ) and EBITDA of Rs59.6bn (margin at 32.2% v/s 33.7% in Q2FY12). The margin compression was driven by a spike in SG&A costs in both, India (15.3% of revenue v/s 14.1% in Q2FY12) and Africa (26.9% v/s 25.8% in INR terms). In India, sponsorship of 1) Airtel Grand Prix, 2) BCCI Cricket and 3) Delhi Half Marathon had an effect. PAT was hit by higher tax rate (35.3% v/s 32.4% in Q2FY12) driven by India where tax holidays continue to phase out."

"The company recorded a 0.8% QoQ growth in total MOU (Idea up 7.2% QoQ) in a seasonally strong quarter as it focused on pricing (ARPM up 3.5% QoQ; 1.4% QoQ for Idea). India + SA revenues grew 3.8% QoQ, driven by growth in the Wireless (4% QoQ; 77% of revenue) and Passive Infrastructure (2.6% QoQ; 19% of revenue) segments. Revenue grew 2.6% QoQ in USD terms (14% QoQ in INR terms) owing to a muted 3% QoQ growth in minutes as ARPM declined marginally 0.4% QoQ. Consolidated Africa operations (including HoldCo) saw a 29bps QoQ (in USD) improvement in EBITDA margin, as higher SG&A at 24.9% (24% in Q2FY12) eroded some of the gains from lower operating costs."

"We believe the recent 2G verdict augurs well for competitive intensity to moderate in the 2G space. However, sustained tariff hikes will prove to be difficult as 1) the industry still remains competitive despite the licence cancellations and 2) TRAI contemplates intervention to control price rise. Owing to the impact of higher SG&A, we reduce our PAT estimates for FY12E and FY13E by ~15% and reduce our FY13E EV/EBITDA based target price to Rs 381 (Rs 409). Maintain 'Accumulate'," says Prabhudas Lilladher research report.

Quarterly Shifts by Morgan Stanley

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