Accumulate Bharti Airtel; target Rs 350: KRChoksey

KRChoksey is bullish on Bharti Airtel and has recommended accumulate rating on the stock with a target price of Rs 350 in its February 02, 2013 research report.

"Bharti's Q3FY13 result was in line on revenue and EBITDA front while net profit declined on account of forex loss. Net sales stood at Rs 20254crs, a growth of 9.4% YoY primarily driven by increase in ARPU and ~7% revenue growth in Africa. EBITDA increased by 3.8% YoY to Rs 6184 crs. Increase in network operating cost led by higher fuel charges dented EBITDA margins by 170bps YoY to 30.5%. Net profit for the quarter declined by 71.9% over Q3FY12 to Rs 284crs on account of forex loss of Rs 216crs. Net profit margin dipped 4100bps to 1.4%. In spite of increase in ARPU on a sequential quarter basis, average revenue per minute remained flat. Over capacity and competitive intensity has led to decline in ARPU. Africa business showed revenue growth driven by increase in subscriber base. We expect operating margins to inch up on account of cost rationalization; however higher debt will increase interest burden which will dent net profitability. Net sales increased by 9.4% YoY to Rs 20254crs primarily driven by revenue growth across the business verticals. India voice segment increased by 7.5% YoY to Rs 10936crs. Net subscriber base increased by 4% over Q3FY12 to 181.9mn subscribers while ARPU declined marginally by 1% YoY to Rs 185.Voice ARPU declined by 3% over Q3FY12 to Rs 153 led by 6% decline in ARPM. However data revenue stood at healthy Rs 47 for the quarter. Voice tariff increased by healthy 10% YoY to 240.8bn minutes. Africa business reported 21% increase over Q3FY12 in subscriber base to 61.6mn at the end of Q3FY13. In spite of 15% increase in MoUs to 144mins, 29% decline in ARPM lead to 13% lowers ARPU to USD 6. Stiff competitive environment and regulatory overhang will put pressure on revenue growth. EBITDA increased by 3.8% over Q3FY12 to Rs 6184crs. Increase in network operating expenses due to higher fuel cost dented EBITDA margins by 170bps YoY to 30.5%. EBITDA margins for Africa business remained flat at 26.6%. Net profit declined by 71.9% YoY to Rs 284crs as the incurred forex loss of Rs 216crs and depreciation increased by 8.8% YoY to Rs 3901crs. Consequently net profit margin declined by 4100bps over Q3FY12 to 1.4%. Valuation: Bharti's wireless segment reported mix KPIs. In spite of ARPU growth, ARPM remained flat. Net subscriber base also declined by 2% over sequential quarter to 181.9mn subscribers. However data segment is showing a steady upward movement in terms of subscriber base and ARPU. We believe voice revenue to be under pressure unless consolidation takes place in the telecom industry. At current price, the stock is trading at 7.2x EV/EBITDA to FY14E earnings. We recommend ACCUMULATE on the stock with a price target of Rs 350," says KRChoksey research report. FIIs holding more than 30% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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