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Last Updated : Oct 26, 2016 11:46 AM IST | Source: CNBC-TV18

Bharti Airtel's cost structure well managed: Phillip Capital

Naveen Kulkarni of Phillip Capital spoke about Bharti Airtel numbers. Commenting on a good set of numbers, he said they the telco‘s cost structure is was managed well.

Naveen Kulkarni of Phillip Capital spoke about Bharti Airtel numbers. Commenting on a good set of numbers, he said they the telco’s cost structure is was managed well.

It tells a lot about the operating performance, he added.

The stock has been outperforming its rival Idea Cellular for almost a year. From this perspective, while Bharti is ahead of the market in terms of product launches, this output will continue, he said. He has a price target of Rs 390.

Below is the verbatim transcript of Naveen Kulkarni’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Sonia: It is very clear that Bharti Airtel could perhaps outperform Idea Cellular because it has been two straight quarters of a better performance than Idea. How did you read in to Bharti’s numbers standalone and what do you expect to see on the stock here on?

A: Numbers are clearly quite good on the operating performance front. So, if I were to look at the cost structure management, they have managed the cost structure very well. So, India EBITDA in a seasonally weak quarter has grown sequentially. On a year-on-year basis it is up 17 percent, so that tells a lot about the kind of operating performance that the company has delivered in India.

The stock has been outperforming Idea Cellular for almost a year now. So, from that perspective this outperformance will continue. Idea will take at least two quarters to get its act together. While Bharti is ahead of the market in terms of product launches, in terms of pre-defensive strategy with regards to Jio. So, this outperformance will definitely continue.

Latha: What is your price target for the stock? Would you buy it right away or do you think that as Jio pans out, you will get it cheaper?

A: Jio will have an impact on the numbers probably Q3 numbers will be fully reflective of the impact of Jio. However, I would believe that at current price Bharti is cheap, so our price target of Rs 390. I don’t see a huge cut in our estimates happening because of the numbers unless and until the management says something on the call, which might probably make us cut the numbers more.

Otherwise, I would see that these are good price points to start accumulating the stock and have higher allocation to the sector.

Sonia: An Idea is an avoid?

A: Idea, again from a valuation point of view it has bottomed out. Operating performance will take time, so it is trading at book value. Historically we have seen that, that is a pretty much a sign where the stock bottoms out. So, valuation perspective, we are quite comfortable.

Again, there are chances that it could be considered as merger and acquisition (M&A) play also. So, there are some triggers there but operating performance will take two quarters for it to pick up.



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First Published on Oct 26, 2016 10:33 am
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